A reference forecast must be connected to what in order to be effective?

A reference forecast must be connected to a level of a hierarchy to be effective because it relies on structured data that reflects the organization’s planning and operational framework. Hierarchies often represent various dimensions of the business, such as product categories, geographical regions, or distribution channels. By linking a reference forecast to a specific level within these hierarchies, organizations can ensure that the forecast is aligned with the specific scope and context of the planning needs. This connection allows for more accurate forecasting as it can consider relevant factors at different levels, such as overall demand trends at the parent level while still capturing the nuances specific to child levels.

Establishing this connection also facilitates more effective collaboration and analysis, as different stakeholders can utilize forecasts generated at various levels for their specific purposes, such as supply chain optimization or sales planning. This level of granularity ultimately enhances the reliability and applicability of forecasting across different operations within the organization.