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FORECASTING

FORECASTING

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Íts Hyp Ër
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3 views6 pages

FORECASTING

FORECASTING

Uploaded by

Íts Hyp Ër
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Production forecasting is the process of estimating future demand for retail products,

as well as the resources required to manufacture those products. Typically, these


resources include manual labor, money, machinery, and raw materials

What is the importance of forecasting in production?

Forecasting is valuable to businesses because it gives the ability to make


informed business decisions and develop data-driven strategies. Financial and
operational decisions are made based on current market conditions and predictions
on how the future looks.

What is forecasting in production and operations management?


Forecasting is the process of projecting past sales demand into the
future. Implementing a forecasting system enables you to assess
current market trends and sales quickly so that you can make informed
decisions about the operations.

Definition of Forecasting

Source: freepik.com
Forecasting is a process that can predict future events by
conducting a study or analysis of past data to find systematic
relationships, patterns, and trends. In other words, forecasting
itself is a vital part of every business organization and for any
significant management decision making.

In future planning, forecasts will become the basis for every


company. if a company can predict what will happen in the
future then they can change their current habits and take a
position that will be much more developed in the future.

Purposes and Functions of Forecasting

Forecasting has several objectives, and according to Heizer and


Render (2009:47) are as follows:
 To review the current and past company policies and see
how far the influence will be in the future.

 Forecasting is necessary because of the time lag or delay


between the time a company policy is set and when the
implementation begins.

 Forecasting is the basis of business depreciation in a


company so that it can increase the effectiveness of a
business plan.
In addition, the forecast has a function that will be seen at the
time of decision making. A good decision is when based on
consideration of what will happen when the decision
implementation begins. If the predictions that we make are not
accurate, the forecasting problem is also a problem that we
always face “Ginting, 2007”.

Factors Affecting Forecasting

Forecasting has several influential factors, here’s the list:

1. Product nature

The production period of a product is very influential. For


example, if a company’s product has a long or short period of
time to survive in the market. In addition, the production of the
product itself can also affect the forecast. So you can use E-
Procurement Software to ensure procurement costs efficiency.

2. Distribution method,The ability of a company to reach its


consumers in the market is one of a factor.

3. The company’s position in the market

The company’s position in the market also affects forecasting,


whether the company is a market leader, follower, or niche.

4. Level of competition.
How the company’s position is compared to its competitors is
also one of the influential factors in forecasting.

5. Historical data.

All event data related to the company in the past. To clarify,


this is a very important factor. Because this is a reference for
companies in forecasting.

Types of Forecasting

Of course, forecasting has several types. The following is an


explanation of those various types:

1. Based on time

First, forecasting methods are based on time. This method is


divide into three, namely:

 Long-term, namely forecast that uses analysis for a longer


time usually lasts for more than two years.

 Medium-term, with a period of three months to two years.

 Short-term, with a period of zero to three months.

2. Based on function

Based on its function, according to Heizer and Render (2009:


47), planning for future operations, forecasting is divide into
three types, namely:

Economic forecasting “economic forecast”.


Focus on predicting inflation rates, availability of money, funds
needed to build housing, and other planning indicators.

Forecasting technology “technological forecast”.


Pay attention to the level of technological progress that can
launch exciting new products that require new plants and
equipment.

Forecasting demand “demand forecast”


Forecasting aims to determine the forecast of demand and
market conditions.

3. Based on data availability

The availability of data will determine how the forecast can be


done. The types or based on data are as follows:

Qualitative Method
The company or organization does not have sufficient data to
analyze. So the forecasting results will also be very subjective
because the results of the analysis are different. For instance
from qualitative methods: Investigations, interviews,
discussions.

Quantitative Method
Whether the company or organization has sufficient data,
usually the method that they will use is the quantitative
method. Where in the process of analysis using data and
numbers approach.

4. Based on the nature of the arrangement

Forecasting based on the nature of the arrangement is divide


into two types “Ginting, 2007”, namely:

Subjective
based on the feelings or intuition of the person who composes
it.

Objective
based on relevant data in the past by using techniques and
methods in analyzing the data.

Get sales data for your company to analyze using the most
complete web-based CRM Software from HashMicro.

Forecasting Method

As we have seen in the previous explanation, there are two


types of forecasting based on the availability of data:

Qualitative method
Qualitative methods are used when the organization or
company does not have data in the past. Either because the
data is not feasible or does not match what you want to predict.
Above all, Forecasting is usually based on intuitive thoughts,
opinions, and knowledge and experience of the compilers.
Qualitative is also based on the results of investigations such as
salesman opinions, sales manager opinions, expert opinions,
and consumer surveys.

The following are the most common qualitative methods:

Market Survey
This method conducts surveys to consumers, stakeholders, or
investigations of practitioners and even competitors. Moreover
use a Survey App to make your company’s surveys simpler,
automated, and effective.

Delphi method
This method uses a group of experts from various backgrounds
to come together to provide opinions in a systematic way.

Personal Insight
This personal insight is a simple forecasting method and is no
longer used by large companies. In addition, this method is
used by discussing or seeing references from people who are
experienced and experts in their fields.

Consensus
In the consensus method, participants attend open discussions.
This is the opposite of the Delphi method. As a result of this
consensus, methods are highly biased. Therefore, many large
companies have abandoned this method.

Quantitative method
The quantitative methods companies or organizations use when
they have sufficient data. Further, this method is the process of
analysis using the data and numbers approach. The following
are types of quantitative methods:

Time Series Method


The time series method is a method that uses analysis between
the variables to be predicted with the time variable.

Cause and Effect Method


This method is based on the relationship between the
estimated variables and other variables that influence it.
However, the variable is not in the form of time.

Conclusion

To sum up, That’s an explanation of forecasting, from


understanding to what the methods are. This knowledge is
quite important because, with forecasting, companies can
predict what will happen in the future. Until finally the company
can grow. It is very different from planning. Which is a process
of systematically preparing activities to be carried out to
achieve certain goals.

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