Business Forecasting

Chapter 1Forecasting for Management

Decisions

Chapter Topics

Introduction Importance of Forecasting Financial and Strategic Importance of

Forecasting The Commonality of Forecasting

Importance of Business Forecasting

Allows organizations to improve profits Essential in eliminating waste such as:

Inventory shortages Missed due dates Plant shut-downs Lost sales Lost customers Expensive expediting Missed strategic opportunities.

Financial and Strategic Importance

Better strategic information Better marketing information Better financial information Better operating information Increased customer service Better allocation of resources

(Continued)

Financial and Strategic Importance

Increased manufacturing and operating efficiency

Higher productivity Stability in planning Reduced finished goods inventory Elimination of waste Increased profitability Increased return on investment.

The Commonality of Forecasting

All organizations wish for excellence in management (whether manufacturing or a hospital).

Demand for products, labor, materials, and other resources must be estimated using either formal or informal forecasting methods.

Business Forecasting

The Art and Science of Forecasting

The Forecasting Process

Business Forecasting Process

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Figure 1.1 The Forecasting Process

Feed

back

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p

Yes

Management’s Question/Problem

Data Gathering

Model Formulation

Design the Forecasting Experiment

Analysis and Interpretation

Valid Results?

Report Results

Chapter Summary

Importance of Business Forecasting As a Strategic Tool Planning and Control Tool

Various Application of Forecasting in Business

The Art and Science of Forecasting

The Process of Forecasting