Question

1. What Forecasting Time Horizons does Target do and why?

2. What Forecast Methods (Quantitative OR Qualitative) does Target use and why?

Answer 1

1. Target is a well established retail company. Forecasting is usually taken quite seriously in retail companies. An effective forecasting technique facilitates the demand planning of products in retail companies. Retail companies conduct forecasting and demand planning so as to avoid any kind of stockout situations. Usually the retail companies like Target use the product level demand forecasting with smaller time horizons, say less than 3 months. A period of 60-75 days is considered as the ideal forecasting time horizon for retail industry. This is so because the demand pattern of consumers is driven majorly by the seasons. Seasonal changes bring change to demand patterns. Hence to maintain accuracy in forecasting techniques, the forecasting time horizon is maintained at a short-term duration window of 60-75 days.

2. Retail companies like Target use product level forecasting technique to facilitate demand planning. The demand for different products is analysed using quantitative forecasting techniques like time series forecasting so as to develop accurate forecasts. Time series forecasting keeps the demand trends in consideration and hence the predictions are usually quite accurate.