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    Chapter II: Forecasting: Forecast

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    CJ De Luna
    The document discusses forecasting, which involves predicting future values of variables like demand. There are two key aspects of forecasts: the expected level of demand and the accuracy of the prediction. Forecasts can be short, long, or intermediate range. Forecasts affect decisions throughout organizations. While forecasts are based on past patterns, they are rarely perfect due to randomness and accuracy decreases over longer time horizons. The forecasting process involves determining the purpose, time horizon, technique, data analysis, preparing the forecast, and monitoring. Major areas of forecasting include economic, technology, and demand forecasting. Qualitative and quantitative methods can be used.

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    Chapter II: Forecasting: Forecast

    Uploaded by

    CJ De Luna
    66 views3 pages
    The document discusses forecasting, which involves predicting future values of variables like demand. There are two key aspects of forecasts: the expected level of demand and the accuracy of the prediction. Forecasts can be short, long, or intermediate range. Forecasts affect decisions throughout organizations. While forecasts are based on past patterns, they are rarely perfect due to randomness and accuracy decreases over longer time horizons. The forecasting process involves determining the purpose, time horizon, technique, data analysis, preparing the forecast, and monitoring. Major areas of forecasting include economic, technology, and demand forecasting. Qualitative and quantitative methods can be used.

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    Chapter II

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    The document discusses forecasting, which involves predicting future values of variables like demand. There are two key aspects of forecasts: the expected level of demand and the accuracy of the prediction. Forecasts can be short, long, or intermediate range. Forecasts affect decisions throughout organizations. While forecasts are based on past patterns, they are rarely perfect due to randomness and accuracy decreases over longer time horizons. The forecasting process involves determining the purpose, time horizon, technique, data analysis, preparing the forecast, and monitoring. Major areas of forecasting include economic, technology, and demand forecasting. Qualitative and quantitative methods can be used.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    66 views3 pages

    Chapter II: Forecasting: Forecast

    Uploaded by

    CJ De Luna
    The document discusses forecasting, which involves predicting future values of variables like demand. There are two key aspects of forecasts: the expected level of demand and the accuracy of the prediction. Forecasts can be short, long, or intermediate range. Forecasts affect decisions throughout organizations. While forecasts are based on past patterns, they are rarely perfect due to randomness and accuracy decreases over longer time horizons. The forecasting process involves determining the purpose, time horizon, technique, data analysis, preparing the forecast, and monitoring. Major areas of forecasting include economic, technology, and demand forecasting. Qualitative and quantitative methods can be used.

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    © All Rights Reserved
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    Chapter II: Forecasting

    Forecast
    A statement about the future value of variable of interest such as demand.
    Prediction about the future
    Two important aspects of forecasts.
    1. The expected level of demand
    2. The degree of accuracy that can be assigned to a forecast
    Forecast maybe:
    1. Short range (e.g., an hour, day, week, or month)
    2. Long range (e.g., the next six months, the next year, the next five years, or
    the life of a product or service).
    3. Intermediate (e.g., one season up to 2 years).
    Forecasts affect decisions and activities throughout an organization
    Accounting, finance
    Marketing
    Management formation System
    Operation
    Product/service design

    Assume causal system


    Past=>future
    Forecast rarely perfect because of randomness
    Forecast more accurate for groups vs. individuals
    Forecast accuracy decreases as time horizon increases
    Elements of Forecasting
    1. Timely
    2. Reliable
    3. Accurate
    4. Meaningful
    5. Written
    6. Easy to use
    Steps in the Forecasting Process
    1. Determine purpose of forecasting
    2. Establish a time horizon
    3. Select a forecasting technique
    4. Gather and analyze data
    5. Prepare the forecast
    6. Monitor the forecast

    Major Areas of Forecasting


    Economic Forecasting- predicts what the general business conditions will be in the future (e.g.,
    Inflation Rates, Gross National Product, Tax, Level of Employment)
    Technology Forecasting- predicts the probability and /or possible future development in
    technology (e.g., Competitive advantage or firms competitors incorporate into their products and
    processes).
    Demand Forecasting- predicts the quantity and timing of demand for a firms products.

    Types of Forecasting
    Judgemental uses subjective inputs
    Time series- use historical data assuming the future will be like the past.
    Associative Models- uses explanatory variables to predict the future.

    Forecasting Methods
    1. Subjective Approach- qualitative in nature and usually based on the opinion of people.
    2. Objective Approach- quantitative / mathematical formulations- statistical forecasting)

    Qualitative
    - methods consist mainly f subjective inputs, which often defy numerical description. It
    involve either the projection of historical data or the development of associative models that
    attempt to utilize causal (explanatory) variables to make a forecast.
    Quantitative
    -consist of mainly of analysing objective or hard data. They usually avoid personal biases
    that sometimes contaminate qualitative methods. In practice either approach or a combination of
    both approaches might be use to develop a forecast.

    Judgemental Forecast
    Executive opinions
    Sales force Opinion
    Consumer Surveys
    Outside opinions
    Delphi Method
    Opinions of managers and staff
    Achieves a consensus forecast
    Time Series Forecast
    Trend- long term movement in data
    Seasonality- short term regular variations in data
    Cycle- wavelike variations of more than one years duration
    Irregular Variations- caused by unusual cirscumtances
    Random Variations- caused by chance

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