Accounting Cost/profit estimates
Finance Cash flow and funding
Human Resources Hiring/recruiting/training
Marketing Pricing, promotion,
MIS IT/IS systems, services
Operations Schedules, MRP,
Product/service design New products and services
Uh, give me a minute....
We sold 250 wheels last
week.... 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
Peculiarities of forecasting are :
Forecasting is concerned with future events.
It shows the probability of happening of future
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.
Follow up action.
Predicts what the
Conditions will be
in the future (e.g.
Tax, level of
into their product
Quantity & timing
of demand for a
Forecasting methods and routes
Importance of Forecasting
Provides relevant and reliable information
about the past and present events and the
likely future events. This is necessary for
It gives confidence to the managers for making
It is the basis for making planning premises.
It keeps managers active and alert to face
challenges of future events and the changes in
Importance in different areas
Fore casting is important for:
Finance uses the long term forecasts to evaluate capital
Human Resources uses forecasts to evaluate personnel
IT designs and implements systems that generate
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 TechniqueChoosing a Forecasting Technique
No single technique works in every situation
Two most important factors
Other factors include the availability of:
Time needed to gather and analyze the data
Elements of a good forecastElements of a good forecast
1. Appropriate forecast horizon
2. Degree of accuracy should be taken into
4. Choose meaningful units (dollars versus units)
5. Use same forecast throughout organization
““Prediction is veryPrediction is very
especially if it's about theespecially if it's about the
Matter By :- Akanksha shrivastav
Created By:- JAi NaGaWat