Have you every noticed that your views on things change when you’re forced to “put your money where your mouth is”? So, you really think that the Leafs will win the Stanley Cup? Wanna bet 500 bucks on that?
Brings you back to reality, doesn’t it? The same concept applies to demand planning/forecasting.
Bias (systemically forecasting too high or too low) is the #1 killer of good forecasts. The biggest problem with bias is its insidious nature – people often introduce bias into their forecasts with the very best of intentions. It may come as a result of being optimistic by nature. Or out of a desire to provide good service, you may feel compelled to add “a little bit extra” to your forecast, just in case.
You know that the demand forecast needs to be a realistic estimate of what you actually expect to happen. Everyone is planning on it. So how can you be sure that you’re not unintentionally killing your forecast with good intentions?
Use the $500 rule. What’s that?
$500 Rule: If you were forced to bet $500 of your own money that your forecast was as close to the truth as possible, would you keep it or change it?