The planning horizon in forecasting refers to what?

The planning horizon in forecasting refers to the period over which forecasts are made. This concept is crucial in operations management as it sets the timeframe for which future demand, supply, costs, and other variables are estimated. A well-defined planning horizon allows organizations to align their strategies, production plans, and resource allocations effectively, ensuring that they meet future demands while managing risks and opportunities.

Different forecasts may necessitate varying planning horizons, with shorter horizons often focusing on immediate operational needs and longer horizons used for strategic planning and capacity management. This understanding helps organizations to make informed decisions that cater to both short-term and long-term objectives.