A simple forecast method that uses the average of a number of historical periods, such as weeks, months, or years, to predict the next period or series of periods. It is best used when there is no trend in demand history. Average forecast method requires a minimum of one month of demand history.

In the following example, the average is used to predict the fifth period using the average of the first four periods:

The above example illustrates one of the limitations of using the average method; averaging dampens trends. A quick glance at the values in periods 1 through 4 implies a consistent upward trend, while our computed value for period 5 reverses the trend. It might have been more accurate to guess that the value for period 5 would be closer to 37 or 38. Trying to predict more than one period in the future with the average forecast method is suspect if there is any upward or downward trend to the historical values.