Delphi Technique in Demand Forecasting

There are many forecasting methods involved in business forecasting. One of these forecasting methods is the Delphi Technique. It's a popular qualitative forecasting technique that relies on opinions of experts to forecast future product demand.

The Delphi method was first introduced in the 1950s by Olaf Helmer & Norman Dalkey of the Rand Corporation to solve a specific military problem. This article will look at the Delphi Technique and how it affects business demand forecasting.

What is the Delphi technique in demand forecasting? 

The Delphi technique is a widely used qualitative in forecasting method  that relies on trusted industry advisors. What sets it apart from the executive opinion method is the involvement of multiple teams for better results.

In the Delphi method, a group of experts generate a demand forecast based on their expertise & knowledge. This forecast is presented to a different group within the company for interpretation. After multiple rounds of interpretation, the forecast passes on to the decision-makers of the organization.

Each expert creates a specific projection when creating a demand forecast. There’s a repeated process of generating, discussing, & editing predictions until they reach a consensus.

Uses of the Delphi Technique

The Delphi Technique is majorly used in subjective scenarios where it isn't possible to use a quantitative method or get absolute results. Businesses can explore various possibilities as multiple experts come together in discussions.

The diversity of the experts ensures greater accuracy. It considers every possible aspect of the problem and accounts for multiple predictions. The Delphi Technique can significantly influence the decision-making process in supply chain regarding policy, long-range forecast, marketing, and more, especially where a creative or unique solution is expected.
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‍How does it work?
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• Choosing the Facilitator
  The method relies on expertise, so the facilitator must have hands-on experience in research and data collection.
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• Recognizing the Experts
  The accuracy of the forecasts depends on the proficiency of the experts involved. Experts can be from within the organization, or they can be external, like a task force, clients, and specialists.
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• Defining the Problem
  You must define a problem for the experts to share their opinions on. They will share their remarks based on their understanding of the issue. To ensure accurate results, it’s important for the issue to be clearly explained to the experts involved.
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• First Round of Survey
  Opinions of experts can be recorded in the form of surveys, polls, and questionnaires. It would be best for them to answer general, open-ended questions in the first round. This will allow them to share their broad perspective. Identity should be kept anonymous during the survey to encourage experts to freely express their opinions. These opinions will be closely examined, and irrelevancy will be eliminated while common perspectives are also noticed.
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• Consecutive Survey Rounds
  Building on the first-round results, questions in the coming rounds will go deeper into the subject to get more accurate results. The experts' opinions might change in the coming rounds after discussions. Results must be summarized & analyzed in order for a common consensus to be found. Depending on how long it takes the experts to reach an agreement, the number of survey rounds can differ.
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• Final Round of Survey
  The final round aims at reaching an unison in the experts' opinions. That's why the final round of questions must encourage decision-making, focusing on the area of agreement among the experts. A common consensus should be reached by the end of this round.
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• Study the Results
  The experts generate a forecast by common consent after the final round of the survey. It will shed light on future demand, risks, & opportunities for the business. Using this forecast, decisions are made regarding future business plans.  
  

Pros & Cons of Delphi Technique

Though used extensively, the Delphi technique has both benefits & drawbacks.

The method relies on the opinions of diverse experts who answer questions from varied perspectives. The anonymity of the experts eliminates the fear of repercussions. Also, it doesn’t require much funding to administer & analyze forecasts using this method.  

On the flip side, the results cannot be deemed completely reliable, due to the lack of quantitative data. It’s also a time-consuming method, where the quality of your results depends on the participants. Some expert opinions might influence others, leading to a flawed forecast.
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To get an accurate forecast, you need a combination of both qualitative & quantitative methods. This is Avercast's area of expertise. Our forecasting software use 250+ complex forecasting algorithms, containing both qualitative & quantitative methods to give you accurate forecasts. With Avercast, you can generate accurate forecasts of up to 5 years in the future with a thorough 'what if' analysis to account for every possible scenario.

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