What is the forecasting model that predicts demand in the next period will equal the demand of the most recent period?

The forecasting model that predicts demand in the next period will equal the demand of the most recent period is the Naïve approach. This method is straightforward and based on the rationale that the most recent data point is the best predictor of future demand. It assumes that changes in demand are minimal from one period to the next, making it simple yet effective in certain scenarios, especially in stable markets or when trend data is not available.

The Naïve approach is beneficial because it requires no complex calculations and can be quickly implemented when immediate decisions are necessary. This characteristic distinguishes it from more advanced methods like exponential smoothing or linear regression, which incorporate more extensive historical data and can capture trends and patterns in demand but are more complex to execute.

In contrast, the simple moving average takes multiple past periods into account to calculate the average, while exponential smoothing gives more weight to recent observations but still relies on a set of historical data points. Linear regression involves a statistical relationship between variables and is not merely dependent on the last observation. The Naïve approach’s simplicity makes it particularly attractive for rapid responses when historical demand data is stable.