Forecasting (1)
-
Upload
jai-nagawat -
Category
Business
-
view
586 -
download
0
description
Transcript of Forecasting (1)
7Forecasting
I see that you willget an A in this semester.
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
Uh, give me a minute.... We sold 250 wheels lastweek.... Now, next week we should sell....
The forecast for any period equals the previous period’s actual value.
It’s like driving a car by looking in the rear-view Mirror.
Peculiarities of forecasting are :Forecasting is concerned with future events.
It shows the probability of happening of future events.
It analysis past and present data.It uses statistical tools and techniques.
☺Analyzing and understanding the problem.
☺Developing sound foundation
☺Collecting and analyzing data.
☺Estimating future events.
☺Comparing results.
Follow up action.
Economic Forecasting
Predicts what thegeneral business
Conditions will be in the future (e.g.Inflation rates, Gross National
product,Tax, level of
employment.)
TechnologyForecastingPredicts theProbability &
Possible futuredevelopment inTechnology (e.g.
Competitive advantage of
firms competitorsincorporation
into their product& processes
Demand Forecasting
Predicts the Quantity & timingof demand for aFirms product.
Forecasting methods and routes
Techniques Routes
Qualitative Quantitative
Simple RegressionMultiple RegressionTime trendsMovingAverages.
MathematicalFormationStatisticalForecasting.NominalGroupTechnique.
Top-DownRoutes
Bottom-UpRoutes
WhereInternational and NationalEventseffect theFutureBehaviorof local variable
WhereLocalEventsEffectTheFutureBehaviorOf localvariable
Importance of Forecasting
Provides relevant and reliable information about the past and present events and the likely future events. This is necessary for sound planning.
It gives confidence to the managers for making important decisions.
It is the basis for making planning premises. It keeps managers active and alert to face
challenges of future events and the changes in the environment.
Importance in different areas
Fore casting is important for: Finance uses the long term forecasts to evaluate capital
investment needs. Human Resources uses forecasts to evaluate personnel
needs. IT designs and implements systems that generate
forecasts. Marketing develops sales forecasts used for mid-term to
long term planning. Operations develops and uses forecasts to make
decisions such as: scheduling, inventory management and long term capacity planning.
The collection and analysis of data about the past, present and future involves a lot of time and money. Therefore, managers have to balance the cost of forecasting with its benefits. Many small firms don’t do forecasting because of high cost.
Forecasting can only estimate the future events. It can guarantee that these events will take place in the future. Long term forecasts will be less accurate as compared to short term forecasts.
Forecasting is based on certain assumptions. If these assumptions are wrong, the forecasting will be wrong. Forecasting is based on past events. However, history may not repeat itself at all times.
Forecasting requires proper judgment and skills on the part of managers. Forecasts may go wrong due to bad judgment and skills on the part of some of the managers. Therefore, forecasts are subject to human error.
Choosing a Forecasting Choosing a Forecasting TechniqueTechnique
No single technique works in every situation Two most important factors
Cost Accuracy
Other factors include the availability of: Historical data Computers Time needed to gather and analyze the
data Forecast horizon
Elements of a good forecastElements of a good forecast
1. Appropriate forecast horizon2. Degree of accuracy should be
taken into account3. Reliable4. Choose meaningful units (dollars
versus units)5. Use same forecast throughout
organization
CONCLUSIONCONCLUSION
““Prediction is very Prediction is very difficult,difficult,especially if it's about especially if it's about the future.the future.””
Matter By :- Akanksha shrivastav
Created By:- JAi NaGaWat