What is a key assumption of the Naïve Method in forecasting?

The Naïve Method in forecasting is based on the assumption that demand in the next period will be the same as the demand observed in the most recent period. This approach relies on the idea that short-term trends and fluctuations will not significantly impact future demand, making it a straightforward and easy-to-implement forecasting technique. It is particularly useful in situations where demand patterns are stable and do not exhibit significant variability or trend shifts.

By using the most recent actual demand as a predictor for the next period, the Naïve Method allows businesses to quickly generate forecasts without complex calculations or extensive historical data analysis. This assumption makes it a practical option for many firms under certain conditions, especially when time is limited or data availability is constrained.