Adapted from pages 679-680 of Principles of Forecasting: A Handbook for Researchers and Practitioners (Armstrong 2001).
When managers receive forecasts, they often cannot judge their quality. Instead of focusing on the forecasts, however, they can decide whether the forecasting process was reasonable for the situation. By examining forecasting processes and improving them, managers may increase accuracy and reduce costs.
One can examine the forecasting processes by systematically judging it against the 140 forecasting principles presented. These principles, organized in 16 categories, cover formulating problems, obtaining information, implementing methods, evaluating methods, and using forecasts.
Why do you need 140 principles? You will not need all of them in any one situation. Nearly all of the principles are conditional on the characteristics of the situation. It would be misleading to write a book on â€œThe Five Principles Used by Successful Forecasters.â€ They could never be appropriate for all the different situations that can arise.
The principles are each coded for strength of evidence, and sources of empirical evidence are listed. Some of the forecasting principles are based on expert opinion. The term â€œcommon senseâ€ is used when it is difficult to imagine that things could be otherwise. â€œReceived wisdomâ€ indicates that the vast majority of experts agree. Forecasters often ignore common sense and received wisdom.