Structuring and integrating human knowledge in demand forecasting: a judgemental adjustment approach

Demand forecasting consists of using data of the past demand to obtain an approximation of the future demand. Mathematical approaches can lead to reliable forecasts in deterministic context through extrapolating regular patterns in time-series. However, unpredictable events that do not appear in the historical data can make the forecasts obsolete. Since forecasters have a partial knowledge of the context and of the future events (such as strikes, promotions) with some probability, the idea presented in this work is on structuring the implicit and the explicit knowledge in order to easily and fully integrate it in final forecasts. This article presents a judgemental-based approach in forecasting where mathematical forecasts are considered as a basis and the structured knowledge of the experts is provided to adjust the initial forecasts. This is achieved using the identification and classification of four factors characterising events that could not be considered in the initial forecasts. Validation of the approach is provided with two case studies developed with forecasters from a plastic bag manufacturer and a distributor acting in the food market. The results show that structuring the expert knowledge through the identification of factor-related events leads to high improvements of forecast accuracy.