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Forecast:: A Statement About The Future Value of A Variable of Interest

Forecasting involves making statements about future values of variables like demand, resources, and capacity planning. Forecasts influence decisions across accounting, finance, human resources, marketing, operations, and product design. Forecasting is used for budgeting, planning capacity, sales, inventory, staffing, purchasing, and more. Common characteristics of forecasts are that they assume the future will resemble the past, are rarely perfect due to randomness, and are more accurate for groups than individuals over long time horizons.

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40 views11 pages

Forecast:: A Statement About The Future Value of A Variable of Interest

Forecasting involves making statements about future values of variables like demand, resources, and capacity planning. Forecasts influence decisions across accounting, finance, human resources, marketing, operations, and product design. Forecasting is used for budgeting, planning capacity, sales, inventory, staffing, purchasing, and more. Common characteristics of forecasts are that they assume the future will resemble the past, are rarely perfect due to randomness, and are more accurate for groups than individuals over long time horizons.

Uploaded by

Anaya Malik
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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3-1 Forecasting

FORECAST:
FORECAST:
 A statement about the future value of a variable of
interest such as resource requirements, capacity planning,
Supply Chain Management (SCM) and product or
service demand.
 Forecasts affect decisions and activities throughout an
organization
 Accounting, finance
 Human resources
 Marketing
 MIS
 Operations
 Product / service design

McGraw-Hill/Irwin
3-2 Forecasting

Introduction
1. Forecasting in business forms the basis for
budgeting and planning for capacity, sales,
inventory, manpower, purchasing and more.
3-3 Forecasting

Applications of forecasting
 Plan or design the system.
 Planning to make use of the system.
3-4 Forecasting

Introduction
 Planning the use of the system relates to short
range and intermediate range planning which
means planning inventory workforce
resources, planning of purchasing and
production activities, budgeting and
scheduling etc.
3-5 Forecasting

Introduction
 Business Forecasting is more than Predicting
demand. Forecasting is also used to predict
profits, revenues, costs, productivity changes.
 Movements of key economic indicators
( GNP, inflation and government loans) and
prices of stocks and bonds.
3-6 Forecasting
FORECAST:
FORECAST:
 A statement about the future value of a variable of
interest such as resource requirements, capacity
planning, SCM and product or service demand.
 Forecasts affect decisions and activities throughout
an organization
 Accounting, finance
 Human resources
 Marketing
 MIS
 Operations
 Product / service design
3-7 Forecasting

Applications of Forecasts

Accounting Cost/profit estimates

Finance Cash flow and funding

Human Resources Hiring/recruiting/training

Marketing Pricing, promotion, strategy

MIS IT/IS systems, services

Operations Schedules, MRP, workloads

Product/service design New products and services


3-8
Web-Based Forecasting: CPFR
Forecasting

Defined

 Collaborative Planning, Forecasting, and


Replenishment (CPFR) a Web-based tool
used to coordinate demand forecasting,
production and purchase planning, and
inventory replenishment between supply
chain trading partners.
3-9 Forecasting

Web-Based Forecasting:
Steps in CPFR
 1. Creation of a front-end partnership agreement
 2. Joint business planning
 3. Development of demand forecasts
 4. Sharing forecasts
 5. Inventory replenishment
3-10 Forecasting

4 Each Common characteristics of all forecasts


1. Assumes causal system( That same
system that existed in the past will exist
in future.
2. Forecasts rarely perfect because of
RANDOMNESS (having no specific
pattern). Allowances should be made for
inaccuracies.
3-11 Forecasting

4 Each Common characteristics of all forecasts

3. Forecasts more accurate for


groups vs. individuals naturally because
forecasting errors in a group tend to
cancel out forecasting errors for
individuals.
4. Forecast accuracy decreases
as time horizon increases indicating it is
safe to make short range forecasts instead
of long term forecasts. If you can recall
we had talked about Flexible and Agile
Corporations in the past.

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