Consensus vs Average Techniques of Forecasting   To accurately...

Consensus vs Average Techniques of Forecasting

To accurately predict the demand for its products for the next year, HUL (Hindustan Unilever) follows a couple of forecasting techniques, both qualitative and quantitative in nature. 

Consider the scenario of the Cornetto brand of ice-cream from HUL. The company has a team of five forecasters who predict the demand for Cornetto. 

In the first stage, every forecaster predicts the demand using the quantitative demand forecasting method of their choice. The following table provides the forecasted figures from each of the forecasters.

Once the individual forecast figures are ready, the forecasters use two techniques to arrive at a single figure.  

The first technique is consensus-based forecasting, wherein all the five experts give their opinions on why their predicted figures are correct and then arrive at a consensual figure (a single demand forecast agreed by all teams). In this scenario, the team arrived at a consensual figure of 15 million units.

In the second technique, the forecasting team takes an average of all the forecast figures. For the given scenario, the average figure comes out to be 14 million units. 

The company then proceeded with these two figures in mind. After the end of the year, the actual demand was found to be 16 million units. 

Determine the forecasting error for both the techniques.

Hint: Forecasting error = (Actual demand - Forecast demand) * 100 / Actual demand

Consensus-based technique = 10%; average taking technique = 4%

Consensus-based technique = 1.25%; average taking technique = 2.5%

Consensus-based technique = 16.5%; average taking technique = 22.5%

Consensus-based technique = 6.25%; average taking technique = 12.5%