Forecasting
FORECASTING
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Introduction
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Forecasting refers
to the “Estimation or prediction of future”
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It involves the prediction of
o
Outcomes
o
Trends
o
Expected future
o
Behavior of
business
o
Behavior of an industry sector
·
It is an operational research technique used
as a basis for planning & decision making
Forecasting
Features & Process
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Features
o
Deals with future events
o
Must for planning process
o
Guessing of future events
o
Consider all factors that can affect
organizational functions
o
Involves personal observations
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Process
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Preparation of foundation
o
Estimation of future
o
Collection of results
o
Comparison of results
o
Refining the forecast
Forecasting
Methods
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Qualitative
o
Executive Committee Consensus
§ Develop forecast by asking a group of knowledgably executives
§ Executives gives their opinions regards to the future
value of the items
§ Presence of a powerful executive can affect the group to
reach on a consensus
o
Delphi Methods
§ It involves a group of experts that eventually develop a
consensus
§ Usually make long range forecast for future sales of a
new product
o
Sales Force Composite
§ It utilize the Sales persons as a good source of
information regards to the
· Future intentions of a customer
· Market change in near future
o
Customer Surveys
§ It involves the analysis of customer’s feed to forecast
§ A firm can base it’s demand forecast on the customers purchasing
plans
·
Quantitative
o
Time Series Models
§ Trends (Upward and downward movement of data over time)
§ Seasonality (Variations that repeat itself at fixed intervals)
§ Cyclical (Has a duration of at least one year)
§ Random (Caused by chance)
o
Casual Models
§ Employ some factors other than time
Forecasting
Importance, Advantages & Limitations
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Importance
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Pivotal role in organization
o
Development of a business
o
Coordination
o
Effective control
o
Key to success
o
Project implementation
o
Primacy to planning
·
Advantages
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Handling of uncertainty
o
Balanced workload
o
Material management
o
Minimization in the fluctuations of
production
o
Utilization of capital and resources
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Limitations
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It can be yield wrong
o
Cannot be considered as a scientific method
o
Unable to specify a concrete relationship between
past and future events
o
Time consuming
o
Cannot be applied to a long period
Video
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