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Decision tree

As explained in Demand Forecasting Best Practices

A decision tree is a machine-learning model that makes predictions by applying a sequence of feature-based questions and following the resulting branches to a terminal prediction.

A decision tree is a machine-learning model that maps questions about data features to a prediction. It supports supply-chain forecasting by turning learned relationships among demand, price, promotion, brand, and history into an interpretable sequence of decisions. section 15.2.2

Follow the tree as a sequence of operational steps:

  • Treat each feature-based yes/no question as a node, such as whether demand in Q–1 exceeds 300. section 15.2.2
  • Split observations according to the chosen question, creating smaller subsets. section 15.2.2
  • Choose questions that reduce prediction error and make the resulting subsets as homogeneous as possible. section 15.2.2
  • Continue through the branches until reaching a leaf containing the final prediction. section 15.2.2

A demand-forecasting path

A trained tree asks: Is demand in Q–1 greater than 300? Yes. Is average price greater than 20? No. Is price in Q+1 below 25? No. The path ends with a predicted demand of 550. section 15.2.2

How Demand Forecasting Best Practices covers it

How deep it goes
Explains nodes, leaves, splits, and error-minimizing questions, while stopping short of detailed growth algorithms.
Examples
Uses Guess Who? and a demand dataset involving brand, price, promotion, and historical demand.
What it assumes
Assumes a dataset with features and outputs; teaches nodes, leaves, splits, and prediction logic from basic examples.
What you can do after
Evaluate decision-tree paths by identifying features, splits, terminal predictions, and the rationale for question selection.
How it connects
Connects machine learning with features, prediction error, forecasting, nodes, leaves, and splits.

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