PAMANTASAN NG Graduate School of Master in Business July 10, 2021

LUNGSOD NG MAYNILA Management Administration

Forecasting: Introduction and

Common Features
Dan Edward Nacion
Group Topics

Introduction to forecasting

Features common to all forecasts

Associative forecasting technique

Approaches to forecasting
 Introduction to forecasting Features common to all forecasts

Lesson Overview

A Definition of forecasting

B Importance of forecasting

C Features common to all forecasts

D Elements of a good forecast

E Example of forecasting within the organization

A Definition of forecasting

Forecast

- a statement about the future value of a

variable of interest

- a process of estimating the future value using the

past and present data and events
A Definition of forecasting The term “forecasting” might vary within the
company or organization:

Plant Manager
Personnel
Requirements

Plant Capacity
Requirements

Capital
Expenditures

HR Manager

Financial
Professional
A Definition of forecasting

Key Question: “What will the customer demand at

some future point in time?”
 A Definition of forecasting
Expected level of demand

Important aspects of forecasting:

Degree of accuracy that can be
assigned to a forecast

“What will the customer demand at

Types of forecast by time:
some future point in time?”
• Short range (days – weeks - months)
➢ job scheduling, work assignments

• Medium range (1 – 2 years)

➢ sales, production

• Long range ( > 2 years )

➢ change in location
A Definition of forecasting

EXAMPLE:
Forecast future child population

Future Child
Population

Child Birth
 EXAMPLE:
A Definition of forecasting Forecast future child population

Immigration
and
Emigration

Economic Prosperity Child Birth Future Child Population

Housing Development Housing Stock

A Definition of forecasting
FORECAST vs PREDICTION
Refers to a calculation or an An actual act of indicating that
estimation which uses data from something will happen in the
previous events, combined with future with or without prior
recent trends to come up a future information
event outcome.

ACCURACY More Less

BIAS Objective Subjective

QUANTIFICATION Can be quantified Can’t be quantified

All forecasts are predictions, but not all predictions are forecasts.
 Introduction to forecasting Features common to all forecasts

Lesson Overview

A Definition of forecasting

B Importance of forecasting

C Features common to all forecasts

D Elements of a good forecast

E Example of forecasting within the organization

B Importance of forecasting
B Importance of forecasting

Inventory or Material Management

Predicting demand or orders of products may
lead to achieving an optimum level of inventories
by reducing the shortage or surplus inventory of
both raw material and finished goods.
B Importance of forecasting
Improve Employee Relations
Forecasting promotes active participation and
coordination of staff members in the process of
forecasting
B Importance of forecasting

Better Utilization of Available Resources

Using forecasting, organizations ensure optimum utilization of their available resources such as
capital, manpower, material, and other resources by identifying the weak areas and giving required
information related to the future.
B Importance of forecasting

Improve Customer Satisfaction

Better customer service leads to customer satisfaction
which demands offering customers the right products/
services in the right quantity and at the right time. Using
forecasting to enhance, refine, and streamline different
functions of an organization such as operations, logistics,
and production.
B Importance of forecasting

Forecasting as a Decision-making Tool

It helps in improving efficiency. Different demand
forecasting techniques such as qualitative and quantitative are
used by organizations to estimate the demand for their
products in the future and decisions are made accordingly.
 B Importance of forecasting Executive
➢ Company goals and engagement to
Finance other companies
➢ Equipment, replacement needs, timing and
amount of funding/borrowing needs

Accounting
➢ New product/process cost estimates,
profit projections, cash management. Marketing
➢ Pricing and promotion, e-business
strategies, global competition
strategies
MIS
➢ New/revised information systems,
Internet services.

Operations
Human Resource
➢ Schedules, capacity planning, work assignments
and workloads, inventory planning, make-or-buy ➢ Hiring activities, including recruitment,
decisions, outsourcing, project management. interviewing, and training; layoff planning,
including outplacement counseling
 Introduction to forecasting Features common to all forecasts

Lesson Overview

A Definition of forecasting

B Importance of forecasting

C Features common to all forecasts

D Elements of a good forecast

E Example of forecasting within the organization

C Features common to all forecasts

• Forecasting techniques generally assume that the same underlying causal

system that existed in the past will continue to exist in the future.

• Forecasts are not perfect; actual results usually differ from predicted values; the
presence of randomness precludes a perfect forecast.

• Forecasts for groups of items tend to be more accurate than forecasts

for individual items because forecasting errors among items in a group
usually have a canceling effect.

• Forecast accuracy decreases as the time period

covered by the forecast — the time horizon —
increases.
 Introduction to forecasting Features common to all forecasts

Lesson Overview

A Definition of forecasting

B Importance of forecasting

C Features common to all forecasts

D Elements of a good forecast

E Example of forecasting within the organization

D Elements of a good forecast

SIMPLE TO
UNDERSTAND
RELIABLE

ACCURATE
TIMELY

COST-EFFECTIVE
IN WRITING EXPRESSED IN
MEANINGFUL UNITS
 Introduction to forecasting Features common to all forecasts

Lesson Overview

A Definition of forecasting

B Importance of forecasting

C Features common to all forecasts

D Elements of a good forecast

E Example of forecasting within the organization

E Example of forecasting within the organization

• Multi-national Business Process Outsourcing company

across 14 countries around the globe like USA, Canada,
Philippines, Japan, India, China, and other countries in
Europe and Latin America
E Example of forecasting within the organization
Healthcare Communications
Media & Entertainment

Financial Services

Retail & Consumer Goods

Transportation & Logistics

Technology

Travel & Hospitality

Energy & Utility

Public Sector
E Example of forecasting within the organization

Retail & Consumer Goods OPERATIONS

MANAGERS
PROJECT
MANAGERS

AGENTS

SUPPORT
GROUP
CLIENTS
(LINE OF BUSINESS)
E Example of forecasting within the organization Retail & Consumer Goods

Budget planning
analyzing the costs and expenses

Schedule planning
make sure deadlines are met

Staff management
recruitment and onboarding

Skills development
provide skill and career development

PROJECT MANAGERS VS OPERATIONS MANAGERS

E Example of forecasting within the organization

CASE: STEPS IN THE FORECASTING PROCESS

Forecast the number of
STEP 1: Determine the purpose of the forecast
resources needed for the
migration of 30 clients to the • Number of resources needed for the project
(Programmer, Testers, Business Analysts, Support, Contractual)
new system

STEP 2: Establish a time horizon

• Medium-range (Aug 2021 to July 2022)
E Example of forecasting within the organization

CASE:
STEP 3: Obtain, clean, and analyze appropriate data
Forecast the number of
• No. of clients
resources needed for the
• Projected new projects – new setup per client
migration of 30 clients to the
• Production issues
new system
• Planned leaves

STEP 4: Select a forecasting technique

• Naive Method

STEP 5: Make the forecast

STEP 6: Monitor the forecast errors

• Project timeline, metrics and milestones
E Example of forecasting within the organization

STEPS IN THE FORECASTING PROCESS

STEP 1: Determine the purpose of the forecast

STEP 2: Establish a time horizon

STEP 3: Obtain, clean, and analyze appropriate data

STEP 4: Select a forecasting technique

STEP 5: Make the forecast

STEP 6: Monitor the forecast errors

 Introduction to forecasting Features common to all forecasts

Lesson Overview

A Definition of forecasting

B Importance of forecasting

C Features common to all forecasts

D Elements of a good forecast

E Example of forecasting within the organization

 PAMANTASAN NG Graduate School of Master in Business
LUNGSOD NG MAYNILA July 10, 2021
Management Administration

END OF PRESENTATION

THANK YOU

Forecasting: Introduction and Common Features Dan Edward Nacion