Collaborative forecasting is the activity for gathering and reconciling information from various internal and external outlets of an organization and to form one integrated statement of demand. Collaborative forecasting is comprised of four key components:
1. Incorporating statistics and algorithms to past data to bring forth pertinent information.
2. Processes and systems to collect customer-level input routinely. This is sometimes called geographic information.
3. Processes to merge management overrides and inputs with the data collected at the customer level.
4. Processes to merge marketing input, which is usually product focused, with the sales view that is typically customer focused.
The planning of resources to service the demand is generally not considered part of the forecasting process. It must, however, be well integrated with the forecasting process for supply chain planning to function effectively.
Incorporating a collaborative forecasting process requires great effort in process redesign and system implementation. A leading technical challenge is the need to reconcile differing views of the market demand.