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Forecast horizon

Last updated August 16, 2023

What is a forecast horizon?

The is the length of time into the future for which forecasts are to be prepared. It is the time period over which a forecast is being made, and it can range from short-term horizons, such as a few days or weeks, to longer-term horizons, such as months or years.

FAQ

The forecast horizon helps decision-makers understand the time frame for which they can rely on the forecasted information. It influences planning, resource allocation, inventory management, and strategic decision-making.

  • Short-term: A forecast horizon of up to 3 months, used for tactical planning and managing immediate operations.
  • Medium-term: A forecast horizon of 3 to 12 months, used for medium-range planning and adjusting strategies.
  • Long-term: A forecast horizon for more than 12 months, used for strategic planning, investment decisions, and long-term business goals.

The accuracy of a forecast may vary depending on the length of the forecast horizon, with longer-term forecasts generally being less accurate than shorter-term forecasts due to the greater uncertainty and variability over longer time periods.