Forecasting Is Always Imperfect

I learned in high school that in a true false question scenario where the question has “always” it usually is false. As an example, “True or False: Chasing The Points is always right.” That would be false. I am not always right.

That being said, forecasting is the exception. It will always be imperfect. Forecasting demand is highly unpredictable, and forecasting is trying to predict the future. The best you can do is come close to the actual demand. The class I’m taking, Operations Analysis (you can see the syllabus for the challenge exam here) teaches a few techniques on how to forecast demand using historical data.

I read an article on Inc about Daymond John on his FUBU brand and forecasting demand:

Product was selling so fast that John and his partners began ordering more than double what they needed for purchase orders. Once again, however, a spike in demand led to growing pains for the business. By overestimating future purchase orders, the company wound up with millions in excess inventory it would be forced to sell at a steep discount.

In order to meet future demand, they ordered twice as much raw materials, but it turned out it was unnecessary.

If I continue to play with Raise, my shirt is on the line with trying to move gift cards. My first 2 to 3 weeks, people were buying up every gift card I had at 1%. So I doubled down and bought even more gift cards expecting people to buy it all up. Guess what? Just like Daymond, my plan failed. After a week, about half of it sold, so I changed the discount percent, which led to my $100 mistake.

I have been contemplating this a lot, if the gift cards don’t sell in four weeks, then I’d just sell it on the other gift card exchanges like GiftCard Zen or Cardpool where they will assume ownership of the gift card. At least I will become liquid again and can continue the cycle and float as little as possible.

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