FORECASTING AND PERFORMANCE:

CONCEPTUALIZING FORECASTING MANAGEMENT

COMPETENCE AS A HIGHER-ORDER CONSTRUCT
TORSTEN DOERING AND NALLAN C. SURESH
State University of New York - Buffalo

This note empirically validates forecasting management competence

(FMC) as a higher-order construct based on four underlying sets of prac-
tices: internal integration, forecasting process quality, effective use of
advanced systems, and evaluation of forecasting. The results from a partial
least squares structural equation model support FMC as a significant dri-
ver for three outcomes: forecast accuracy, cost reduction, and delivery per-
formance, thereby establishing predictive validity. The study provides
insights to the relative effectiveness of the four sets of forecasting practices
constituting FMC. A mediator–moderator analysis shows that forecast
accuracy is not a mediator or a moderator between FMC and the other
two outcome variables of cost reduction and delivery performance. This
indicates that in addition to effective demand forecasting practices, other
processes such as sales and operations planning (S&OP) are also impor-
tant for translating the benefits of effective forecasting to realize favorable
business outcomes. A multigroup analysis shows that the impact of the
four practice elements on the three performance outcomes also differs
based on specific business contexts.

Keywords: forecasting management; human judgment and decision making; supply

chain performance; partial least squares; scale development; survey methods

INTRODUCTION Despite such valuable insights, the managerial pro-

Many organizations are still striving to make
demand forecasting more effective, despite years of
effort on the part of researchers and practitioners. It is
widely known that demand forecasting drives strategic
and operational decisions such as identification of
market opportunities, planning of financial require-
ments, production and capacity planning, and inven-
tory management (Fildes, Nikolopoulos, Crone &
Syntetos, 2008; Makridakis, Wheelwright & Hyndman,
1998; Moon, Mentzer & Smith, 2003). Given this
importance, forecasting methods have been studied
extensively (Dalrymple, 1987; Kahn, 2002; Klassen &
Flores, 2001; Sanders & Manrodt, 1994), yielding
many useful insights. For instance, it has been found
that simple forecasting methods such as exponential
smoothing can outperform more sophisticated ones;
the relative ranking of the performance of different
methods depends on the accuracy measure being
used; and the accuracy of combined methods is
greater than that of individual methods on average
(Armstrong, 2001; Makridakis & Hibon, 2000).
cesses required to organize the forecasting process for
eliciting information from various external and inter-
nal sources, communicating them among various
business functions, using the right forecasting meth-
ods for the right contexts, and translating them via
the sales and operations planning process into
bottom-line advantages for the firm are yet to be
understood fully.
More recently, forecasting has received attention at
the supply chain level, highlighting the benefits of
sharing forecasts among partners via collaborative
planning, forecasting, and replenishment (CPFR), and
vendor managed inventory (VMI). This broader per-
spective is seen in the framework shown in Table 1,
adapted from the work of Smith (2001). This frame-
work distinguishes between forecasting techniques
and managerial processes on the one hand and fore-
casting as an intrafirm or interfirm (supply chain)
process on the other. But even as forecasting is now
being addressed at the supply chain level, forecasting
processes within firms continue to be problematic.

Xxxx 2016 1
 Journal of Supply Chain Management
TABLE 1
Forecasting Methods and Management
II
Management
Intra-organizational integration,
communication, collaboration, coordination,
internal information flow, employee
accountability, broad-based (team-based)
approach and accountability
I III
Proper use of qualitative and quantitative
Methods
forecasting methods developed
Individual Organization
Note: Adapted from Smith (2001).
Thus, the focus of our study is on quadrant II in
Table 1.
Several contributions are made by this study. First,
we advance the notion of forecasting management as
a competence, in the form of a higher-order construct.
In past studies, four underlying groups of forecasting
practices have been prescribed as essential compo-
nents of forecasting management (Mentzer & Moon,
2005; Moon et al., 2003). We empirically assess the
construct validity of these prescribed practices as a
reflective-formative hierarchical component model
(HCM) (Becker, Klein & Wetzels, 2012). We draw
from resource advantage (R-A) theory to substantiate
the proposed forecasting management competence
(FMC). A survey-based investigation is conducted to
establish the construct and predictive validity of FMC.
Given many intervening organizational processes
between forecasting and operational outcomes, we
then investigate if forecasting accuracy acts as a media-
tor or moderator between FMC and cost reduction
and delivery performance. In addition, we explore
contingency effects through multigroup analyses to
better understand the relationships between forecast-
ing practices and performance outcomes.
THEORETICAL DEVELOPMENT
Underlying Practices of Forecasting Processes
Four groups of practices have emerged from past
studies as being essential for successful forecasting
management (Mentzer & Moon, 2005; Moon et al.,
2003). These four elements are as follows: (1) internal
integration among marketing, production, and other
relevant functions; (2) forecasting methods and
2 Volume 0, Number 0
IV
Inter-organizational integration. collaboration,
coordination, alignment, and forecast
information sharing, directly or via CPFR, VMI,
extranet connectivity, etc. and other supply
chain initiatives
Models for assessing impact of information
flow on supply chain (multi-echelon)
inventories, operations, transportation costs,
bullwhip effects, etc.
Supply Chain
process quality; (3) systems employed for forecasting
(e.g., hardware and software); and (4) performance
measurement (i.e., evaluation of forecast accuracy and
updating). Based on a substantial number of case
studies, Mentzer and Moon (2005) also categorized
the level of sophistication on each of these four prac-
tices into four stages. Several authors have pointed
out the need for empirical support of these practices
(Fildes et al., 2003). Based on these four sets of prac-
tices, we propose a second-order FMC construct
(Henceforth, all construct names are in capitals for
ease of exposition). Table 2 summarizes these four
practice elements, along with the three dependent
variables investigated in the current study.
The first element, Internal Integration, denotes the
extent of communication (i.e., forecast information
sharing), collaboration, and coordination among the
internal functions, along with information exchange
with external sources such as customers and suppliers.
Integration of the forecasting process, internal and
external collaboration, top management support, and
employee accountability are important elements of
forecasting management (Winklhofer, Diaman-
topoulos & Witt, 1996). A second aspect of Internal
Integration refers to the organizational processes
adopted for forecasting. It has been argued that
broader participation, accountability, and individual
contributions to forecasting across various functions
will ensure greater acceptance and commitment to act
effectively in order to realize operational advantages
from better forecasting. It has also been found that
team-based approaches to forecasting can improve
industry-level and long-term forecasts (Kahn & Ment-
zer, 1994). Thus, we hypothesize that organizational
 Forecasting Management Competence

TABLE 2
Forecasting Management Constructs

Construct Description
Internal integration Collaboration, communication, coordination for forecasting within firm, forecast
information flow within firm, broader participation, team-based approaches to
forecasting, accountability for forecasts
Forecasting process Proper selection and use of forecasting methods, use of top-down and
quality bottom-up approaches and their reconciliation, choice of relevant variables,
time horizons, level of sophistication of techniques used, training,
documentation of forecasting process, segmentation of products for differential
pursuit of forecast accuracy
Effective use of Shared and up-to-date information systems and technologies for forecasting,
advanced systems adequacy of hardware, and software platform for forecast information sharing
within the organization
Evaluation of Monitoring accuracy, relative impact of forecast errors for various product
forecasting categories, utilizing these for improvements; use of confidence intervals,
demand variabilities in addition to single-point forecasts
Accuracy Accuracy of forecasts, subjective, and objective measure
Cost reduction Impact of forecasting on operational costs such as Inventory, transportation, and
production costs
Delivery performance On-time deliveries, meeting delivery promises, and reactions to changing
customer demand

integration for forecasting is a key element of forecast-
ing management. This construct of Internal Integra-
tion has been widely investigated in supply chain
management research (Leuschner, Rogers & Charvet,
2013). All measurement items utilized in this study
are presented in Table S1.
The second practice construct pertains to the
“methodological approach” (Mentzer & Moon, 2005).
It denotes proper selection and use of forecasting
methods given the wide range of techniques currently
available for forecasting, the use of top-down and bot-
tom-up forecasting processes and their reconciliation.
This also involves assigning different levels of impor-
tance for forecasting demand for various product
classes, the level of sophistication of the techniques
used, and the level of training and documentation of
forecasting procedures adopted. Emerging advanced
forecasting methods, data mining, and predictive ana-
lytics have served to introduce even greater sophistica-
tion and complexity in forecasting, adding to the
necessity for statistical and technical training of fore-
casting personnel. We refer to this set of practices,
another first-order construct in our model, as Forecast-
ing Process Quality (FPQ).
Third, the Effective Use of Advanced Systems can
enhance the accuracy and effectiveness of forecasts and
improve forecast information sharing, eventually lead-
ing to better organizational performance. The use of
computers and software for forecasting has increased
over the years. The effective use of information systems
may also facilitate better forecast information flow
across organizational functions. Thus, we posit that the
Effective Use of Advanced Systems serves as another
construct that is part of forecasting management.
Fourth, the systematic Evaluation of Forecasting Per-
formance is another critical factor which may con-
tribute to FMC. It denotes the extent to which a firm
assesses not only the accuracy of its forecasts, but also
the relative performance impact of forecast errors as a
basis to update the forecasting process.
Forecasting Management Competence
Based on the four underlying sets of practices dis-
cussed above, we define forecasting management as a
second-order competence construct. Similar
approaches have been previously adopted, for instance
in the development of a purchasing competence con-
struct based on a set of defining practices, as in Nara-
simhan, Jayaram and Carter (2001) and in a low-cost
country sourcing competence by Kusaba, Moser and
Rodrigues (2011).
The conceptualization of forecasting management as
a competence can be viewed through the lens of the
resource-based view (RBV) of the firm, with forecasting
competence as a resource that is valuable, not widely
held, and hard to imitate or substitute (Barney, 1991).
More recently, R-A theory (Hunt, 2000; Hunt & Davis,
2008; Hunt & Morgan, 1995) has been advanced as an
extension to the RBV (Leuschner et al., 2013). R-A the-
ory has a downstream, market-oriented perspective,
stating that organizations pursue two distinct kinds of
advantages: advantages in resources as well as

Xxxx 2016 3
 Journal of Supply Chain Management
positional advantages in the marketplace. In R-A the-
ory, resources are defined as tangible and intangible
entities available to an organization that enable it to
produce efficiently and/or effectively a market offering
that has value for some market segment (Hunt & Davis,
2008). Entities available to a firm are classified as “re-
sources” only when they enable a firm to produce a
market offering that has value as determined by the
market. A theoretical exposition of the defining ele-
ments of R-A theory, in relation to the RBV, can be
found in the recent works of Barney (2012) and Hunt
and Davis (2012). As Hunt and Davis (2012) articu-
late, with R-A theory, there is no fundamental depar-
ture from a RBV other than also requiring market-
driven determination of what constitutes a resource. A
demand-side orientation in theories relevant to supply
chain management is also discussed at length in Priem
and Swink (2012).
Resource advantage theory rests on nine founda-
tional premises, as articulated in Hunt (2000). Compe-
tences are viewed as “higher-order resources” that are
“socially complex, interconnected combinations of
tangible basic resources (e.g., specific machinery), and
intangible basic resources (e.g., specific organizational
policies and procedures, skills and knowledge of
employees) that fit coherently together in a synergistic
manner” (Hunt, 2000). In this light, forecasting man-
agement can be viewed as a competence, based on the
tenets of R-A theory.
Higher-order constructs like FMC are increasingly
used to reduce model complexity, to express and eval-
uate multidimensional concepts, to match the level of
abstraction between predictor and criterion variables
and to increase the breadth of concepts and their gen-
eralization (Edwards, 2001; Wetzels, Odekerken-
Schroder & Van Oppen, 2009). In past work, the
influence of specific forecasting practices has been
FIGURE 1
Reflective-Formative Hierarchical Component Model
Internal
Q1 (6 items)
Integration
-0.061
Process
Q2 (4 items)
Quality 0.481***
FMC
(HCM)
Advanced 0.292**
Q3 (4 items)
Systems
0.414***
Q4 (4 items) Evaluation
*p < .10; **p < .05; ***p < .01
4 Volume 0, Number 0
analyzed independently instead of conjointly in a
nomological network. The four forecasting practice
elements cover different aspects of forecasting man-
agement and are therefore formative (as opposed to
being reflective) in nature. In a formative model, the
directional arrows point from indicator variables to
the construct, or from a construct to a higher-order
construct. Each of the four practice elements repre-
sents a distinct aspect of FMC. A high level of Internal
Integration, for example, does not necessarily mean
that a high level of FPQ must be present. The four
sets of practices affect the level of forecasting manage-
ment but are not conceptually interchangeable, which
also indicates that FMC should be formative. In con-
trast to the reflective mode, in which a construct
“causes” the indicators, the four forecasting practices
do not need to covary. In the ensuing analysis, we
attempt to study the individual impact of each fore-
casting practice element through an HCM. Thus,
H1: FMC is a second-order construct which consists
of the four forecasting management practices.
Hypothesized Model Structure
The overall hypothesized model structure relates
FMC, along with its underlying practices, to three per-
formance variables: Accuracy, Cost Reduction, and
Delivery Performance (Figure 1). The traditional out-
come variable in a forecasting context has been fore-
cast accuracy with the common assumption that
higher accuracy will lead to better operational perfor-
mance. However, Danese and Kalchschmidt (2011a,
2011b) could not find a direct connection between
sophistication of forecasting techniques and accuracy
and suggested other links.
In addition to accuracy, operational cost and deliv-
ery performance have also been used as proxies to
Accuracy
Q5_1, Q6_1
R2=0.376
0.613***
Cost
0.713*** Reduction Q7 (4 items)
R2=0.508
0.584***
Delivery
Performance Q8 (3 items)
R2=0.341
 Forecasting Management Competence
measure forecasting performance (Davis & Mentzer,
2007). The outcome measure of Cost Reduction cap-
tures the impact of forecasting on inventory, trans-
portation, and production costs, which can ultimately
impact customer satisfaction. Operational costs should
be reduced through better forecasting practices and
collaboration (McCarthy & Golicic, 2002). The fore-
casting exercise also provides opportunities for better
understanding of markets and customer behavior,
thus possibly directly improving costs and delivery
performance independent of improved forecast accu-
racy. Therefore, we hypothesize that:
H2: FMC is positively related to Accuracy, Cost
Reduction, and Delivery Performance.
In addition, the possible relationships between
Accuracy and the other two dependent variables of
Cost Reduction and Delivery Performance should be
explored. It is often assumed that a high level of fore-
cast accuracy will automatically result in favorable
business outcomes such as lower costs and improved
delivery performance. However, the outcomes of fore-
casting also depend on other processes and interfunc-
tional integration as part of sales and operations
planning (S&OP). To culminate in favorable business
outcomes, forecasting has to overcome the varied
interests, differing priorities, and incentives of func-
tions in matching demand and supply (Oliva & Wat-
son, 2009, 2011). The sales function’s main goal is
typically linked to targets which are determined inter-
nally as well as at the organizational level. The finance
function strives to meet revenue targets and adequate
returns on investment besides managing cash flow
and financial viability. As part of the budgeting pro-
cess, forecasts may end up becoming sales and rev-
enue targets. The operations function manages the
complexities of the production and supply network
striving to meet demand and delivery dates and
ensures adequate quality levels while keeping costs
and inventories under control. It is also common that
the operations function may be limited in its deci-
sion-making capabilities due to a cognitive burden,
resulting in nonoptimal replenishment decisions
(Sterman, 1989). In the translation of demand fore-
casts into viable production plans, the S&OP process
often involves production smoothing which results in
buffer inventories. In addition, data pertaining to fore-
casts may be inaccurate, incomplete, or unavailable.
Given these disconnects, the operations function often
generates its own forecasts. Marketing may also sec-
ond guess sales forecasts because they can be distorted
by promotions and incentive targets (Oliva & Watson,
2009, 2011). A significant part of inventory costs for
raw materials and outsourced parts depends on the
ordering and replenishment actions of purchasing that
may procure materials in excess of immediate needs.
Xxxx 2016
This occurs when there are volume discounts offered
by suppliers, through supply uncertainties, long and
erratic supplier lead times, increased material ordering
when material prices are on the rise, transportation
economies of scale, speculative advance ordering to
ensure guaranteed material availability, etc. There are
thus numerous factors subsequent to forecasting that
may erode the favorable outcomes expected through
improved forecast accuracy. Hence, a high level of
forecast accuracy does not automatically guarantee
superior operational performance.
Forecast Accuracy should therefore be explored as a
mediator between FMC and Cost Reduction, and
between FMC and Delivery Performance. Smith and
Mentzer (2010) found evidence of a significant rela-
tionship between forecast accuracy and logistics per-
formance. Zotteri and Kalchschmidt (2007) found
that forecasting had an impact on company perfor-
mance. However, Danese and Kalchschmidt (2011a,
2011b) could not confirm forecast accuracy as a medi-
ator between forecasting variables and operational
performance. The absence of a mediation effect was
explained by the fact that similar levels of forecast
accuracy can have different impacts on operational
performance, as the internal environment is difficult
to control (Kalchschmidt, 2012). Thus, given limited
past research on mediation effects, and based on con-
flicting findings in past research, we put forth:
H3a: Forecast Accuracy mediates the relationship
between FMC and Cost Reduction, and
between FMC and Delivery Performance.
Among the four sets of FMC practices, Internal Inte-
gration and Evaluation of Forecasting can have direct
effects on the outcomes of Cost Reduction and Deliv-
ery Performance without necessarily depending on
Forecast Accuracy. These practices may directly
improve the efficacy of the S&OP function, thereby
resulting in positive operational outcomes. A struc-
tured forecasting process may also induce better cus-
tomer orientation, and more effective planning and
implementation. Thus, given possible direct effects on
the outcomes of Cost Reduction and Delivery Perfor-
mance, it is conceivable that Forecast Accuracy may
have a moderating effect, causing a differential impact
of FMC on Cost Reduction and Delivery Performance.
Hence, we posit:
H3b: Forecast Accuracy moderates the relationship
between FMC and Cost Reduction, and
between FMC and Delivery Performance.
Contingency Analysis
Past research in operations management has shown
repeatedly that processes and practices may not be
universally applicable and that they depend on the
5
 Journal of Supply Chain Management
specific context (Sousa & Voss, 2008). With respect to
the external context, demand volatility can be
expected to have a bearing on the impact of FMC on
performance. Higher demand volatility may increase
the impact of forecasting, necessitating contextual
analysis, as pointed out by Kerkk€anen (2010). Internal
conditions such as the manufacturing process can be
classified into intermittent (job shop and batch) pro-
duction systems on the one hand and continuous
(repetitive and flow) process situations on the other.
It can be argued that the relative importance and
impact of forecasting may be different for these con-
trasting environments. Another aspect meriting further
investigation is the size of the firm. It may be argued
that smaller firms, more mindful of survival, may be
more market sensitive and may be superior on fore-
cast management practices. On the other hand, larger
firms may have better and more dedicated resources
by way of systems and people for forecast manage-
ment. Thus, there may be differential effects with
respect to size as well. Lastly, the influence of forecast-
ing can be different depending on the manufacturing
context. Make-to-stock (MTS) systems are known to
be “push” systems driven primarily by forecasts, as
opposed to the “pull systems,” that is, engineer-,
make-, and assemble-to-order (ETO/MTO/ATO) sys-
tems. It can be argued that forecasting may be more
important for forecast-driven push systems as opposed
to pull systems. Danese and Kalchschmidt (2011b)
suggest that the effect of forecast accuracy under ETO/
MTO/ATO regimes may not be as important to
improve delivery performance. It also has been noted
that managers in just-in-time settings place more
emphasis on accurate forecasts (Wisner & Stanley,
1994). This leads us to hypothesize that:
H4: The impact of FMC on the three performance
outcomes is contingent on the contextual char-
acteristics of (1) demand volatility, (2) process
type and size, and (3) manufacturing strategy.
RESEARCH METHODS
We employed a survey methodology to collect the
data used to test the study’s hypotheses. The survey
design began with a thorough literature review to
identify scales used in past research. Newly created
scales were based on the theoretical foundations pre-
sented earlier, following Churchill (1979). The survey
was conducted at the business unit level using a seven
point Likert-type scale (Table S1). Sample data were
collected from across the United States from con-
tributing members of relevant LinkedIn groups
(APICS, IBF, IIF, S&OP/CPFR) with a focus on
demand planning to specifically target senior level
managers who were directly involved in forecasting.
6 Volume 0, Number 0
Invitations to participate in the study were sent based
on job profiles in three waves via electronic messages
in accordance with the methods prescribed by Dill-
man, Smyth and Christian (2009). Manufacturing
companies from sectors 31 to 33 of the 2012 NAICS
classification were included in the sample. Out of the
556 qualified individuals contacted, we received 102
complete surveys, corresponding to an effective
response rate of 18 percent. The sample was checked
for obvious response patterns such as “straight-lining,”
numerical inconsistencies and for survey “speeders.”
Out of the 102 cases and the 32 initial Likert-scale
items used for the structural model, only one value
was missing which was imputed via mean value
replacement. A statistical power analysis was conducted
to confirm the adequacy of the sample and effect
sizes.
Firms ranged from small enterprises to well-known
public companies. The average number of employees
in the data set was 16,865 (5 percent trimmed
mean = 10,580), with a standard deviation of 52,600
and a median of 2,000. A total of 38 percent of
respondents were at the CEO, VP, or Director level,
with the remainder having relevant functions at the
managerial level. Some representative titles at the
managerial level were Forecasting Manager, Sr.
Demand Planner, Sr. Business Analyst, and Demand
and Supply Planning Manager. The respondents had
been working for an average of 8 years in their cur-
rent functions (Table 3).
To assess nonresponse bias, we first compared the
percentage of respondents in each NAICS two-digit
group with the number of companies in North Amer-
ica in each of these three categories (Census, 2010).
There was no significant difference compared to the
sample distribution according to a goodness of fit test
(v2(2) = .7, p = .65). Nonresponse bias was also
TABLE 3
Sample Demographics
Number of NAICS
Employees (2-digit) Position
Mean 16,865 31 18% CEO, 3%
President
Median 2,000 32 21% VP, 34%
Director
Min 20 33 61% Demand 63%
Manager,
Analyst
(On avg.
8 years in
function)
Max 425,000
 Forecasting Management Competence
tested using the procedure of Armstrong and Overton
(1977). A series of two-sample t-tests of the first and
last 30 cases (on tenure, strategic focus, manufacturing
process, and strategy) did not show significant differ-
ences (p > .05).
Common method bias was tested using Harman’s
one-factor test. Principal component analysis without
rotation produced seven measurement items with
eigenvalues greater than one. As normality tests can
only provide limited guidance for the application of
the nonparametric PLS-SEM method, skewness and
kurtosis of the responses were tested (Hair, Hult, Rin-
gle & Sarstedt, 2013). The majority of the responses
were within the recommended 1 to +1 range for
skewness and kurtosis.
RESULTS
Partial Least Squares Structural Equation Modeling
(PLS-SEM) was used to estimate the reflective-forma-
tive HCM. PLS-SEM has been frequently used in oper-
ations management research (Peng & Lai, 2012), and
it offers several unique advantages (Chin & Newsted,
1999).
Measurement Model
We adopted the procedure of Hair et al. (2013) and
employed confirmatory tetrad analysis (CTA-PLS) as a
supplemental empirical test to confirm the measure-
ment model specification. The reflective specification of
the first-order constructs could be confirmed for all
four-first-order constructs. All common reliability mea-
sures are displayed in Table S1. The lowest composite
reliability (qc) is .844, and the highest value (for “oper-
ational cost”) is .958, confirming the internal consis-
tency of the constructs (Nunnally & Bernstein, 1994).
Convergent validity was assessed through item loadings
and average variance extracted (AVE). The AVE values
TABLE 4
Discriminant Validity (Fornell–Larcker Criterion)
Delivery
Accuracy Performance Evaluation Integration Reduction Systems Quality
Accuracy .856
Delivery .482 .834
performance
Evaluation .501 .490
Internal .387 .360
Integration
Cost reduction .502 .586
Advanced systems .477 .460
Process quality .554 .451
Square root of average variance extracted values are printed in bold; nondiagonal elements are the correlations.
are above .5 for all the constructs, as shown in Table 4.
Five measurement items marked with an asterisk in the
Table S1 had loadings under .7 and were removed after
considering the impact on content validity, resulting in
improved AVE scores.
Discriminant validity was tested with a matrix of
cross-loadings, and no violation was found. A more
conservative approach to assess discriminant validity
is the Fornell–Larker criterion, comparing the con-
struct correlations with the square root of each con-
struct’s AVE (Fornell & Larcker, 1981). As seen from
the AVE values in Table 4, each construct shares more
variance with its own measurement items than with
other constructs. Recently, the heterotrait-monotrait
ratio of correlations (HTMT) was suggested as a more
stringent alternative to test for discriminant validity
(Henseler, Ringle & Sarstedt, 2015). All HTMT ratios
were clearly under the .9 limit for all seven constructs
(not shown). Only one ratio, between FPQ and Evalu-
ation of Forecasting, had a value of .875 and did not
meet the more conservative .85 limit. All upper boot-
strapping confidence intervals were below one, how-
ever, providing evidence of discriminant validity.
Structural Model
Following the recommendations of Becker et al.
(2012), we estimated the hierarchical model with
repeated indicators in formative mode to achieve real-
istic parameter recovery. The path estimates of the
forecasting practice constructs using this approach
highlight their individual contributions to FMC and
not their correlations.
The weights between the four forecasting practice
constructs and FMC are reported on the left-hand side
of Figure 1. The path coefficient between Internal
Integration and FMC is not significant. However, the
Internal Integration construct was not removed
because: (1) formative constructs do typically
Internal Cost Advanced Process
.812
.701 .809
.657 .553 .923
.551 .517 .433 .784
.747 .678 .652 .503 .842
Xxxx 2016 7
 Journal of Supply Chain Management

TABLE 5
Predictive Power of Hierarchical Component Model

Stone-
R2 (Full Geisser Q2 R2 Direct R2 HCM
Model) (Full Model) (per DV) (per DV)
Accuracy .376 .228 .384 .422
Cost reduction .508 .413 .501 .536
Delivery performance .341 .209 .309 .354

contribute with distinct content; (2) removing a for- without the intervening construct of FMC, are shown
mative construct may alter the meaning of a higher- in Table 6. The path coefficients of FPQ are significant
order construct; and (3) the relationship may prove at the .01 level for Accuracy and Cost Reduction. But
significant in a specific context. Internal Integration it is not found to be significant for Delivery Perfor-
has a loading of .705 (not shown) in regard to FMC mance, which can be explained by the fact that Deliv-
and is therefore important in an absolute sense (Hair ery Performance is dependent on the performance of
et al., 2013, p. 129). In addition, dropping this con- several other functions such as order processing and
struct did not increase the R2 values of the dependent S&OP systems. Ritzman and King (1993) also showed
constructs or their path coefficients. that Delivery Performance is influenced by order pro-
The second and fourth constructs, FPQ and Evalua- cessing systems, manufacturing flexibility, presence of
tion of Forecasting, have the strongest overall impact excess capacity and safety stocks, and distribution sys-
on FMC, with path coefficients of .481 (t = 3.60) and tems. These issues are expanded upon in the Discus-
.414 (t = 2.81), respectively. Thus, three of the four sion section.
constituent path coefficients, including Effective Use
of Advanced Systems with a coefficient of .292 Mediation and Moderation of Forecasting
(t = 2.43), are moderate to strong and significant. This Accuracy
indicates that the four sets of forecasting practices We adopted the procedure of Hair et al. (2013)
contribute to the overall notion of FMC, suggesting based on the earlier work by Preacher and Hayes
partial support for H1. Collinearity was not a problem (2004) to test for mediation effects by meeting three
with our formative HCM because all four variance conditions (Figure 2). The direct effect between FMC
inflation factors were below a value of 3.0. and Cost Reduction without the mediator is signifi-
The R2 values of all three dependent constructs cant, with a path coefficient of .737 (not shown). But
range from .341 to .508, indicating sufficient explana- the relationship between the possible mediator Accu-
tory power (Figure 1). Their path coefficients, with racy and Cost Reduction, a necessary but not suffi-
values between .584 and .713, are strong and signifi- cient condition, is not significant with a path
cant, indicating that a higher level of FMC is posi- coefficient of .118. Hence no mediation effect exists.
tively related to improved Accuracy, Cost Reduction, Next we tested the possible mediation effect of Accu-
and Delivery Performance, thereby supporting H2. racy on the FMC—Delivery Performance path. The
Table 5 shows the assessment for the predictive
power of the HCM. We utilized the cross-validated
TABLE 6
redundancy measure Q2 to assess predictive validity
via blindfolding (Geisser, 1975; Stone, 1974). Values Direct Effects (Path Coefficients) without
above zero confirm predictive relevance for all three Higher-Order Construct (FMC)
dependent constructs. Johnson, Rosen, Chang, Djurd-
jevic and Taing (2012) recommend substantiating the Cost Delivery
conceptual usefulness of higher-order constructs by Accuracy Reduction Performance
assessing their comparative predictive power. As seen Internal .102 .071 .086
in Table 5, the higher-order FMC construct improves integration
predictive power through higher R2 values in contrast Process .395*** .325*** .149
to the direct paths without the higher-order construct. quality
When higher-order constructs such as FMC are used, Advanced .263** .057 .257***
systems
the direct impact of constituent factors on the out-
Evaluation .141 .338** .311**
comes may not be visible. Thus, the direct effects of
the four constituent factors on the three outcomes, **p < .05; *** .01.

8 Volume 0, Number 0
 Forecasting Management Competence

FIGURE 2
Mediation Analysis

Cost
Internal
Reduction
Integration
R2=0.518

-0.053
0.644***
Process 0.118
Quality 0.469***
FMC 0.594*** Accuracy
(HCM) R2=0.352
Advanced 0.295**
Systems
0.452*** 0.221*

0.415***
Delivery
Evaluation Performance
R2=0.372

*p < .10; **p < .05; ***p < .01

relationship between Accuracy and Delivery Perfor-
mance is marginally significant, with a path coefficient
of .221. The size of the indirect effect is fairly small
(.131, .594 9 .221). The bootstrapping result for this
product is not significant and does not indicate medi-
ation, particularly in combination with the low vari-
ance accounted for of 22 percent (Hair et al., 2013, p.
224). It may be noted that the mediation effect was
tested simultaneously to model multiple goals, as
depicted in Figure 2. Testing mediation with Delivery
Performance or Cost Reduction separately had no sta-
tistically significant impact on these results. Thus, H3a
was not supported.
The moderation effect of Accuracy was tested using
the two-stage approach of Hair et al. (2013, p. 263)
and Henseler and Chin (2010). This approach must

FIGURE 3
Moderation Analysis

Cost
Internal
Reduction
Integration
R2=0.552

-0.000
Process -0.088 0.125
0.643***
Quality 0.401***
FMC
Accuracy
(HCM)
Advanced 0.230*
Systems 0.442*** -0.063 0.237**

0.490***
Delivery
Evaluation Performance
R2=0.387

*p < .10; **p < .05; ***p < .01

Xxxx 2016 9
 Journal of Supply Chain Management
be used if formative measurement models are
involved. This model tests if the relationship between
FMC and Cost Reduction, and FMC and Delivery Per-
formance, depends on the level of the continuous
variable Accuracy. The test does not confirm Accuracy
as a moderator in our model. None of the interaction
effects are significant (Figure 3). Thus, H3b was not
supported. The absence of mediation and moderation
effects was consistent with the results of prior studies
such as Ritzman and King (1993), as well as Danese
and Kalchschmidt (2011a, 2011b) who could not
confirm forecast accuracy as a mediator between fore-
casting variables and operational performance.
Heterogeneity and Multigroup Analysis
We utilized multigroup analysis (MGA) to assess
possible contingency effects. The split of the first
multigroup analysis (MGA I) was related to high and
low demand volatility, based on responses to ques-
tions IP38 and IP39 (Table S1). The cutoff point was
set at a maximum difference in month-to-month
demand changes of 80 percent, which coincides with
a natural break in the visual distribution of the vari-
able and is near the median. MGA II compares com-
panies that have repetitive assembly or continuous
flow processes with companies with job shop or batch
processes (IP13, Table S1). MGA III contrasts compa-
nies with 2,000 or more employees (median) to smal-
ler companies. Finally, MGA IV was intended to
analyze predominant MTS companies to companies in
an ETO/MTO/ATO environment.
A new three-step procedure for PLS-SEM models to
test measurement invariance of composite models was
applied to each MGA as proposed by Henseler, Ringle
and Sarstedt (forthcoming). The configurational
TABLE 7
Multigroup Analysis Results
MGA I
Demand Volatility:
Diff = Peak-Trough
Multigroup Diff:High (50) => Diff:
Analysis Low (44)a
Int. Integer. => FMC +.672 (.025/.036)b
Proc. Quality => FMC
Adv. Systems => FMC .362 (.034/.079)
Evaluation => FMC
FMC => Accuracy
FMC => Cost Reduction
FMC => Delivery Perf. .208 (.032/.174)
Avg. R2 increase 24.1%
a
Sample size.
b
Difference in path coefficients, p-value (Henseler’s MGA/Welch-Satterthwaite).
10 Volume 0, Number 0
invariance in Step 1 is given as we test an identical
model for each of the group comparisons with the
same algorithm settings. In Step 2, the equality of
composite scores (construct level) between groups can
be confirmed through a significance test of their corre-
lation values. If invariance in Step 1 and 2 can be
confirmed, we can assume partial measurement invari-
ance and are able to continue with the MGA. The
results show that correlations between composites
across multigroup analyses I-III in Step 2 are invari-
ant, allowing us to proceed. We had to exclude a
comparison of manufacturing strategies (MGA IV), as
partial invariance could not be established in Step 2.
Henseler’s robust nonparametric bias-corrected boot-
strap technique for MGA was employed to identify sig-
nificant differences in path coefficients. The results of
this analysis are summarized in Table 7. The difference
in path coefficients between the models and their sig-
nificance is reported; for example, a path coefficient of
.200 in the first model and a path coefficient of +.400
in the second model are reported as a change of +.600.
The overall results support the MGA approach and
present interesting findings. MGA I compares firms
based on high and low demand volatility. The average
increase in R2 value of 24.1 percent across all depen-
dent constructs compared to the main model is quite
high. Splitting the data into two groups and running
two separate models provides increased explanatory
power. It may be noted that the construct Internal
Integration has now become significant. A significant
difference in path coefficients of +.672 (p = .025)
between models was estimated, going from high to
low demand volatility. The impact of FMC on delivery
performance is lower and significant in the context of
lower demand variability (Table 7).
MGA II MGA III
Process: Repetitive => Size: Number of
Intermittent Employees
Rep./Flow (48) => High (41) =>
Job/Batch (53) Low (39)
.507 (.019/.042) .666 (.005/.008)
.211 (.004/.061)
13.3% 29.5%
 Forecasting Management Competence
MGA II contrasts firms producing with a repetitive
and continuous flow process versus firms operating in
an intermittent environment (job shop, batch). The
increase in R2 value (13 percent) is modest, but signif-
icant. A significant difference in the Effective Use of
Advanced Systems–FMC path coefficients of .507
(p = .019) between models was estimated, going from
repetitive and continuous flow to intermittent envi-
ronment. Thus, firms operating as intermittent systems
do not show the same level of impact of Advanced
Systems on FMC as firms operating in repetitive envi-
ronments.
MGA III compares the effects between large and
small firms. The average R2 increase of the three
dependent constructs is almost 30 percent, the highest
among the three multigroup comparisons. There is
also a significant difference in the Advanced Systems–
FMC path coefficients of .666 (p = .005), moving
from large to small companies. Hence, it may be con-
cluded that the impact of the level of Advanced Sys-
tems on FMC is greater in firms with more than 2,000
employees. The effect of FMC on Delivery Perfor-
mance is also stronger for larger firms.
DISCUSSION
Managers face numerous options in terms of the
wide range of forecasting techniques that are now
available, coupled with a wide variety of associated
management practices. This study provides support
for grouping them parsimoniously into four action-
able sets of practices which constitute a broader con-
ceptualization of FMC. It was shown that this
competence directly affects the outcomes of Forecast
Accuracy, Cost Reduction, and Delivery Performance.
Among the four sets of practices, FPQ emerged as
the most impactful dimension of FMC, indicating
that managers should pay particular attention to the
constituent elements of this construct. Using a struc-
tured well-defined forecasting process and guidelines
within the organization and using the right forecast-
ing techniques for each category of items are partic-
ularly important. Given the wide range of available
forecasting techniques, selecting proper forecasting
techniques for each class of items has been a chal-
lenge for practitioners. This requires proper training
of forecasting personnel on statistical aspects and
correct use of forecasting methods. Other aspects
pertaining to this set of practices can be seen in
Table 2. The effective use of both top-down meth-
ods of disaggregation and bottom-up approaches
and their reconciliation, as suggested by Mentzer
and Moon (2005), could not be confirmed as part
of FPQ, perhaps due to different approaches fol-
lowed by various industries in this study. Table 6
shows that FPQ directly affects Accuracy and Cost
Xxxx 2016
Reduction. But there was no significant direct effect
on Delivery Performance, which may be influenced
by other factors such as the presence of adequate
inventory and capacity buffers, and the efficiency of
order processing and logistics systems, as discussed
in Ritzman and King (1993).
The second most important element of FMC was
Evaluation of Forecasting which includes monitoring
the accuracy of forecasts, understanding the relative
operational impact of forecast errors for various pro-
duct categories, prioritizing them and utilizing this
information for improving future forecasts. The shar-
ing and evaluation of forecast performance on the
part of several departments is another element in this
category. The effort invested in developing forecast
performance measures is wasted if it is not utilized to
improve forecasting capability and forecasting climate
(Davis & Mentzer, 2007). But despite the obvious util-
ity of performance measurement, there is often resis-
tance to using performance measures because they can
be used to assign blame rather than to address prob-
lems (Davis & Mentzer, 2007; Moon et al., 2003; Sha-
piro, 1977). The direct effects in Table 6 show that
Evaluation of Forecasting has a significant association
with operational Cost Reduction and Delivery Perfor-
mance but not with Accuracy. Given this strong and
direct link between the evaluation of forecasts and
operational performance, organizations must find an
acceptable way to implement forecasting performance
evaluations.
The third important construct was the Effective Use
of Advanced Systems, which refers to the use of up-to-
date information systems and technologies for inter-
nal and external sharing of forecast information. It
includes ensuring adequate hardware and software
platforms for forecasting and for supporting the criti-
cal S&OP processes and interfunctional integration.
The direct effects between Advanced Systems and
Forecast Accuracy as well as Delivery Performance are
significant (Table 6). The Effective Use of Advanced
Systems does not seem to impact Cost Reduction
directly. The impact of Effective Use of Advanced Sys-
tems on FMC was also found to depend on the con-
text. This link was less strong in job shops and in
batch production environments, possibly due to lim-
ited capital investments by smaller companies. In lar-
ger firms, a higher level of Effective Use of Advanced
Systems based on a generally higher level of invest-
ments in information technologies appeared to pay
off through a significant improvement in Delivery Per-
formance (Table 7). Larger organizations may also
have to rely more on advanced systems due to
increased complexity. With respect to demand volatil-
ity, the MGA I showed that investments via Effective
Use of Advanced Systems are more impactful for FMC
when demand volatility is high.
11
 Journal of Supply Chain Management
Internal Integration did not have a significant
impact on FMC, unlike the other three constructs.
But the importance of Internal Integration became
clearer in the contingency analysis. All survey items
loaded well on this construct with high reliability, as
shown in Table S1, except for forecast sharing with
suppliers. This factor requires that all related depart-
ments jointly arrive at forecasts, sharing forecast-rele-
vant information among internal departments, along
with a shared accountability for forecasts. This ele-
ment also includes what Fildes, Goodwin, Lawrence
and Nikolopoulos (2009) call a forecasting meeting,
where marketing, production, and sales personnel
come together to agree on a final forecast or make
judgment-based adjustments. Table 6 shows that the
Internal Integration construct does not have signifi-
cant direct effects on any of the three performance
outcomes. But the significance of Internal Integration
becomes evident in MGA I (Table 7), comparing
firms facing high and low demand volatility. Internal
Integration has a stronger and more significant
impact on FMC when demand volatility is low. This
is an interesting finding that merits further investiga-
tion in future studies taking into account the integra-
tion issues pertaining to related processes such as
S&OP, and in specific contexts such as lean produc-
tion environments, as shown in Wisner and Stanley
(1994).
All four of the above sets of practices thus coher-
ently constitute the notion of an FMC. This forecast-
ing competence was also shown to affect the
outcomes of Forecast Accuracy, Cost Reduction, and
Delivery Performance significantly. The highest impact
of this FMC was on Cost Reduction, followed by
Accuracy and Delivery Performance.
Examining the relationships further among FMC
and the three outcome variables, it was shown that
Forecast Accuracy did not mediate or moderate the
relationship between FMC and Cost Reduction, and
between FMC and Delivery Performance. It was
shown that FMC directly affected Cost Reduction and
Delivery Performance without necessarily acting via
Forecast Accuracy. The presence of direct effects
between FMC and the outcome variables may seem
perplexing at first, but it may be noted that FMC was
defined as a broad competence including elements
which can have direct effects. Internal Integration may
have direct effects on Cost Reduction and Delivery
Performance independent of the Forecast Accuracy
level, as it addresses the challenges of cross-functional
collaboration and integration, contributing to the effi-
cacy of the S&OP process. This may serve to augment
operational outcomes directly. Another constituent
element of FMC, the Effective Use of Advanced Sys-
tems, may also result in favorable direct effects on
outcome measures without necessarily acting on the
12 Volume 0, Number 0
Accuracy pathway. These results somewhat extend the
results of past research. For instance, the early work of
Lee and Adam (1986) found that higher forecast
errors may not necessarily result in higher total cost.
These and other similar findings were also empirically
supported by the works of Danese and Kalchschmidt
(2011a, 2011b).
Thus, managers need to be cognizant of the fact
that improvements in forecast accuracy do not auto-
matically translate into cost reduction, improvements
in delivery performance, and other operational
advantages. Such outcomes are also dependent on
the efficacy of related nonforecasting processes.
These nonforecasting processes may in turn be rein-
forced and improved through several elements of
FMC.
LIMITATIONS AND FUTURE RESEARCH
Forecasting processes in many firms continue to
exhibit a distinct lack of structure and inadequate
mechanisms for translating forecasting methods and
practices into operational advantages. This study per-
tains to the foundational issues of forecasting manage-
ment within a single firm. Such improvements in
within-firm processes may also serve to improve fore-
casting processes at the supply chain level, aiding
information sharing, and collaborative forecasting
among firms in a supply chain via initiatives such as
CPFR and VMI.
Some of the limitations of this study pertain to the
survey methods employed. The results are based on
the information provided by key informants and one
survey instrument, which is common with this type of
survey research. Tests for heterogeneity such as Finite
Mixture Partial Least Squares (FIMIX-PLS) and MGA
ideally require larger sample sizes to estimate all pos-
sible aspects.
More studies are needed to further validate the
notion of the FMC construct among a wider range of
manufacturing and service firms. The multigroup anal-
yses indicated differences between companies in MTS
and make-to-order environments, yet we could not
interpret these results based on the measurement
invariance test. This may indicate that firms with dif-
ferent production types treat forecasting management
very differently, an aspect that needs more attention.
Among the outcome measures, in addition to forecast-
ing deviation, forecasting bias measures also need to
be studied which may have a stronger impact on
operational performance (Ritzman & King, 1993).
Further research is warranted to investigate the com-
plementarity of S&OP processes with forecasting in
order to translate the benefits of effective forecasting
into favorable business outcomes. The adoption of a
configurational perspective for FMC, the identification
 Forecasting Management Competence
of gestalts, based on internal coherence among a set
of attributes, use of clustering techniques to identify
and develop taxonomies, and tests of fit as profile
deviation from a theoretical or empirical reference
model are other useful avenues for future research.
Several aspects in forecast management are also sub-
ject to behavioral dynamics relating to goal setting,
budgeting, reward structures, and accountability-
related issues, and these require further investigation.
REFERENCES
Armstrong, J. S. (Ed.). (2001). Principles of forecasting:
A handbook for researchers and practitioners (1st
ed.). Dordrecht: Kluwer Academic Publishers.
Armstrong, J., & Overton, T. (1977). Estimating non-
response bias in mail surveys. Journal of Marketing
Research, 14, 396–402.
Barney, J. (1991). Firm resources and sustained com-
petitive advantage. Journal of Management, 17 (1),
99–120.
Barney, J. (2012). Purchasing, supply chain manage-
ment and sustained competitive advantage: The
relevance of resource-based theory. Journal of Sup-
ply Chain Management, 48 (2), 3–6.
Becker, J.-M., Klein, K., & Wetzels, M. (2012). Hierar-
chical latent variable models in PLS-SEM: Guideli-
nes for using reflective-formative type models.
Long Range Planning, 45 (5), 359–394.
Census. (2010). Statistics of U.S. Businesses Main
Page. Retrieved May 1, 2014, from http://www.
census.gov/econ/susb/
Chin, W. W., & Newsted, P. R. (1999). Structural
equation modeling analysis with small samples
using partial least squares. In R. H. Hoyle (Ed.),
Statistical strategies for small sample research (pp.
307–341). Thousand Oaks, CA: Sage Publica-
tions.
Churchill, Jr., G. A. (1979). A paradigm for develop-
ing better measures of marketing constructs. Jour-
nal of Marketing Research, 16 (1), 64–73.
Dalrymple, D. J. (1987). Sales forecasting practices:
Results from a United States survey. International
Journal of Forecasting, 3 (3–4), 379–391. http://
doi.org/10.1016/0169-2070(87)90031-8
Danese, P., & Kalchschmidt, M. (2011a). The impact
of forecasting on companies’ performance: Analy-
sis in a multivariate setting. International Journal of
Production Economics, 133 (1), 458–469.
Danese, P., & Kalchschmidt, M. (2011b). The role of
the forecasting process in improving forecast
accuracy and operational performance. Interna-
tional Journal of Production Economics, 131 (1),
204–214.
Davis, D. F., & Mentzer, J. T. (2007). Organizational
factors in sales forecasting management. Interna-
tional Journal of Forecasting, 23 (3), 475–495.
Dillman, D. A., Smyth, J. D., & Christian, L. M.
(2009). Internet, mail, and mixed-mode surveys: The
Xxxx 2016
tailored design method. (3rd ed.). Hoboken, NJ:
Wiley.
Edwards, J. R. (2001). Multidimensional constructs in
organizational behavior research: An integrative
analytical framework. Organizational Research
Methods, 4, 144–192.
Fildes, R., Bretschneider, S., Collopy, F., Lawrence, M.,
Stewart, D., Winklhofer, H., & Moon, M. A.
(2003). Researching sales forecasting practice:
Commentaries and authors’ response on “Con-
ducting a Sales Forecasting Audit” by M. A. Moon,
J. T. Mentzer & C. D. Smith. International Journal
of Forecasting, 19 (1), 27–42.
Fildes, R., Goodwin, P., Lawrence, M., & Nikolopou-
los, K. (2009). Effective forecasting and judg-
mental adjustments: An empirical evaluation
and strategies for improvement in supply-chain
planning. International Journal of Forecasting, 25
(1), 3–23.
Fildes, R., Nikolopoulos, K., Crone, S. F., & Syntetos, A.
A. (2008). Forecasting and operational research: A
review. Journal of the Operational Research Society, 59
(9), 1150–1172.
Fornell, C., & Larcker, D. F. (1981). Evaluating struc-
tural equation models with unobservable vari-
ables and measurement error. Journal of Marketing
Research, 18 (1), 39–50.
Geisser, S. (1975). The predictive sample reuse
method with applications. Journal of the American
Statistical Association, 70 (350), 320–328.
Hair, Jr., J. F., Hult, G. T. M., Ringle, C., & Sarstedt,
M. (2013). A primer on partial least squares struc-
tural equation modeling (PLS-SEM). Thousand
Oaks, CA: Sage Publications.
Henseler, J., & Chin, W. W. (2010). A comparison of
approaches for the analysis of interaction effects
between latent variables using partial least squares
path modeling. Structural Equation Modeling, 17
(1), 82–109.
Henseler, J., Ringle, C. M., & Sarstedt, M. (2015). A
new criterion for assessing discriminant validity
in variance-based structural equation modeling.
Journal of the Academy of Marketing Science, 43
(1), 115–135. http://doi.org/10.1007/s11747-
014-0403-8
Henseler, J., Ringle, C., & Sarstedt, M. (forthcoming).
Testing measurement invariance of composites using
partial least squares. Retrieved from http://
info.smartpls.com/data/uploads/micom.pdf
Hunt, S. D. (2000). A general theory of competition:
Resources, competences, productivity, economic growth.
Thousand Oaks, CA: Sage Publications.
Hunt, S. D., & Davis, D. F. (2008). Grounding supply
chain management in resource-advantage theory.
Journal of Supply Chain Management, 44 (1), 10–
21.
Hunt, S. D., & Davis, D. F. (2012). Grounding supply
chain management in resource-advantage theory:
In defense of the resource-based view of the firm.
Journal of Supply Chain Management, 48 (2), 14–
20.
13
 Journal of Supply Chain Management
Hunt, S. D., & Morgan, R. M. (1995). The compara-
tive advantage theory of competition. Journal of
Marketing, 59 (2), 1–15.
Johnson, R. E., Rosen, C. C., Chang, C.-H. D., Djurd-
jevic, E., & Taing, M. U. (2012). Recommenda-
tions for improving the construct clarity of
higher-order multidimensional constructs. Human
Resource Management Review, 22 (2), 62–72.
Kahn, K. B. (2002). An exploratory investigation of
new product forecasting practices. Journal of Pro-
duct Innovation Management, 19, 133–143.
Kahn, K. B., & Mentzer, J. T. (1994). The impact of
team-based forecasting. Journal of Business Forecast-
ing Methods and Systems, 13, 18.
Kalchschmidt, M. (2012). Best practices in demand
forecasting: Tests of universalistic, contingency
and configurational theories. International Journal
of Production Economics, 140 (2), 782–793.
Kerkk€anen, A. (2010). Improving demand forecasting
practices in the industrial context. Lappeenranta
University of Technology. Retrieved from http://
www.doria.fi/handle/10024/59314
Klassen, R. D., & Flores, B. E. (2001). Forecasting
practices of Canadian firms: Survey results and
comparisons. International Journal of Production
Economics, 70, 163–174.
Kusaba, K., Moser, R., & Rodrigues, A. M. (2011).
Low-cost country sourcing competence: A concep-
tual framework and empirical analysis. Journal of
Supply Chain Management, 47 (4), 73–93.
Lee, T. S., & Adam, Jr, E. E. (1986). Forecasting error
evaluation in material requirements planning
(MRP) production-inventory systems. Management
Science, 32 (9), 1186–1205.
Leuschner, R., Rogers, D. S., & Charvet, F. F. (2013).
A meta-analysis of supply chain integration and
firm performance. Journal of Supply Chain Manage-
ment, 49 (2), 34–57.
Makridakis, S., & Hibon, M. (2000). The M3-Compe-
tition: Results, conclusions and implications.
International Journal of Forecasting, 16 (4), 451–
476.
Makridakis, S., Wheelwright, S. C., & Hyndman, R. J.
(1998). Forecasting: Methods and applications (3rd
edn). New York, NY: John Wiley & Sons.
McCarthy, T. M., & Golicic, S. L. (2002). Implement-
ing collaborative forecasting to improve supply
chain performance. International Journal of Physical
Distribution & Logistics Management, 32 (6), 431–
454.
Mentzer, J. T., & Moon, M. A. (2005). Sales forecasting
management: A demand management approach.
Thousand Oaks, CA: Sage Publications.
Moon, M. A., Mentzer, J. T., & Smith, C. D. (2003).
Conducting a sales forecasting audit. International
Journal of Forecasting, 19 (1), 5–25.
Narasimhan, R., Jayaram, J. J., & Carter, J. R. (2001).
An empirical examination of the underlying
dimensions of purchasing competence. Production
and Operations Management, 10 (1), 1–15.
14 Volume 0, Number 0
Nunnally, J. C., & Bernstein, I. H. (1994). Psychometric
theory. New York, NY: McGraw-Hill.
Oliva, R., & Watson, N. (2009). Managing functional
biases in organizational forecasts: A case study of
consensus forecasting in supply chain planning.
Production and Operations Management, 18, 138–
151.
Oliva, R., & Watson, N. (2011). Cross-functional
alignment in supply chain planning: A case study
of sales and operations planning. Journal of Opera-
tions Management, 29, 434–448.
Peng, D. X., & Lai, F. (2012). Using partial least squares
in operations management research: A practical
guideline and summary of past research. Journal of
Operations Management, 30 (6), 467–480.
Preacher, K. J., & Hayes, A. F. (2004). SPSS and SAS
procedures for estimating indirect effects in sim-
ple mediation models. Behavior Research Methods,
Instruments, & Computers, 36 (4), 717–731.
Priem, R. L., & Swink, M. (2012). A demand-side per-
spective on supply chain management. Journal of
Supply Chain Management, 48 (2), 7–13.
Ritzman, L. P., & King, B. E. (1993). The relative sig-
nificance of forecast errors in multistage manufac-
turing. Journal of Operations Management, 11 (1),
51–65.
Sanders, N. R., & Manrodt, K. B. (1994). Forecasting
practices in US corporations: Survey results. Inter-
faces, 24 (2), 92–100.
Shapiro, B. P. (1977). Can marketing and manufactur-
ing co-exist? Harvard Business Review, 55 (5), 104.
Smith, C. D. (2001). Improving supply chain sales
forecasting. In J. T. Mentzer (Ed.), Supply chain
management (pp. 155–182). Thousand Oaks, CA:
Sage Publications.
Smith, C. D., & Mentzer, J. T. (2010). User influence
on the relationship between forecast accuracy,
application and logistics performance. Journal of
Business Logistics, 31 (1), 159–177.
Sousa, R., & Voss, C. A. (2008). Contingency research
in operations management practices. Journal of
Operations Management, 26 (6), 697–713.
Sterman, J. D. (1989). Modeling managerial behavior:
Misperceptions of feedback in a dynamic decision
making experiment. Management Science, 35 (3),
321–339.
Stone, M. (1974). Cross-validatory choice and assess-
ment of statistical predictions. Journal of the Royal
Statistical Society. Series B (Methodological), 36 (2),
111–147.
Wetzels, M., Odekerken-Schroder, G., & Van Oppen,
C. (2009). Using PLS path modeling for assessing
hierarchical construct models: Guidelines and
empirical illustration. Management Information Sys-
tems Quarterly, 33 (1), 11.
Winklhofer, H., Diamantopoulos, A., & Witt, S. F.
(1996). Forecasting practice: A review of the
empirical literature and an agenda for future
research. International Journal of Forecasting, 12
(2), 193–221.
 Forecasting Management Competence
Wisner, J. D., & Stanley, L. L. (1994). Forecasting
practices of JIT and non-JIT purchasers. European
Journal of Purchasing & Supply Management, 1 (4),
219–225.
Zotteri, G., & Kalchschmidt, M. (2007). Forecasting
practices: Empirical evidence and a framework for
research. International Journal of Production Eco-
nomics, 108 (1), 84–99.
Torsten Doering (M.B.A., State University of New
York—Buffalo) is a Ph.D. candidate at The State
University of New York—Buffalo and an assistant pro-
fessor at Daemen College. His research interests
include empirical supply chain management and
manufacturing research with focus on demand plan-
ning and integration in a global context. He is cur-
rently working on the impact of culture and interfirm
collaboration at county, industry, and firm levels
using hierarchical, longitudinal, and structural equa-
tion modeling approaches. Mr. Doering is the recipi-
ent of the 2015 Rising Star Award at the University of
Buffalo School of Management.
Nallan C. Suresh (Ph.D., University of Cincinnati)
is UB Distinguished Professor & Chair, Department of
Operations Management & Strategy at the School of
Management, State University of New York, Buffalo.
Xxxx 2016
He has published widely in leading journals and has
presented numerous papers at international confer-
ences. His papers have appeared in journals such as
Management Science, Decision Sciences, Journal of Opera-
tions Management, International Journal of Production
Research, International Journal of Production Economics,
IIE Transactions, International Journal of Flexible Manu-
facturing Systems, European Journal of Operational
Research, Computers and Industrial Engineering, Interna-
tional Journal of Operations and Production Management,
Journal of Manufacturing Systems, Production and Inven-
tory Management, Journal of Intelligent Manufacturing,
Operations Management Review, and SME Technical
Papers. His contributions include the coedited book
Group Technology and Cellular Manufacturing: A State-of-
the-Art Synthesis of Research and Practice, Kluwer Aca-
demic Publishers, Boston/Dordrecht/London. He is a
recipient of: Alfred Bodine/Society of Manufacturing
Engineers Award for Studies in Machine Tool Eco-
nomics; Joseph T.J. Stewart Faculty Scholarship, and
the Sustained Achievement Exceptional Scholar Award
at SUNY, Buffalo.
SUPPORTING INFORMATION
Additional Supporting Information may be found in
the online version of this article:
Table S1. Operationalization of Constructs and
Statistics.
15