OIS’s forecast replaces the current forecasting best practice with a new best practice: developing a forecast with the best possible profit, the most profitable one. The current best practice, Stage I, was shared with the author in the following quote from Professor Hanssens, UCLA’s Anderson school of business.
“Perhaps one additional perspective is the value of combining judgment and model based forecasts. I have attached an old, but very good article on this.” The article, “Data Based Models and Managerial Intuition” is available here.
In Stage II, OIS improves that process by integrating the two forecasts in a single model with:
- a judgement-based forecast is an input
- then OIS creates a new best possible forecast, the most profitable one, as an output. And, given OIS’s resources, the Stage II profit is the best those resources will ever be able to generate.
This most profitable forecast has also solves a chronic marketing problem; that of sizing and allocating the S of SG&A most profitability.