Published on

Published in: Business, Technology
  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide


  1. 1. Forecasting<br />
  2. 2. Definition<br />It is estimating the future demand for products & services & the resources necessary to produce these outputs <br /> or<br /> Forecasts is the essence of management . Its techniques are used in every types of organization may be it government or private, production or service & social or religious <br />Forecasts are critical inputs to business plans, & budgets .<br />Finance – predict cash flows & capital requirements.<br />Human Resource – To anticipate hiring & training needs.<br />Operations – forecasts to plan output levels, purchase, output schedules, inventory , capacity planning<br />
  3. 3. WHY DO WE FORECAST ?<br /> It precedes planning . Organizations face different set issues while they engage in planning , & in each of these forecasting plays an important role as a tool for the planning process. Key areas of applications of Forecasting<br />Short term fluctuations in Demand e.g. Restaurant <br />Better materials management – Organizations can benefit from better materials management, & ensure materials are available in time.<br />Manpower Decisions – Hiring or layoff <br />Basis for Planning & scheduling- planning & scheduling can be done effectively <br />Strategic Decisions – Useful for Long range strategic decision making. This includes planning for product line decisions, new products etc.<br />
  4. 4. Scope of Forecasting <br />Forecasting can be at international level depending upon the area of operation of particular institution or It can also be confined to a given product or service supplied by a small firm . <br /> It can be determined in three dimension : <br />TIME<br />PRODUCT<br />GEOGRAPHY<br />
  5. 5. Forecasting Time Horizon<br />Short term Forecasts – ( 1-3 Months ) - <br />These forecasts are tactical decisions. How much inventory should be planned for next month , how much raw materials to be scheduled for next month<br />Mid Term Forecasts ( 12-18 months ) – <br />These are annual plans . How much product should we plan next year? How much capacities needs to be increased next year ?<br />Long Term Forecasts ( 5 – 10 Years ) <br />These are purely strategic decisions. <br />What new products to be planned , What new Technology . E.gmaruti planning for mid segment car ( compete with nano) <br />
  6. 6. Sources of Data <br /><ul><li>Sales Force Estimate - One of the most valuable sources of data & quality of data that is available is the sales force that operates in the field. Since sales force spans the entire geographic range of operation they have access to data pertaining to consumption, changing patterns , market growth
  7. 7. Points of Sales ( POS ) Data Systems - sort of information technology . In supermarket if you buy Surf excel , at check counter when sales person swipes pack through POS system, the data is captured & transmitted to the relevant database for the company to analyze
  8. 8. Forecasts from supply Chain Partners – Obtaining POS data from distributors & suppliers
  9. 9. Trade / Industry Association Journals – These journals provide research data on the sector in which the organization is operating ( Automobile sector )
  10. 10. B2B Portals / Market Places – Another source of data in the era of www is the existence of industry portals & B2B market places. For agricultural www.industry, for small & medium sector enterprises
  11. 11. Economic Surveys & Indicators :Studied conducted by research organizations on macroeconomic trends are good indicators of emerging trends in the consumption patterns of several classes of goods & services .e.g. Centre for monitoring Indian Economy ( CMIE ), Consensus Economics
  12. 12. Subjective Knowledge : Long-term Forecasts enable strategic decision making. Senior Managers, subject experts are vital source of data.</li></li></ul><li>Advantages <br />Helps in Effective planning <br />Helps in better co-ordination <br />Achieves co-operation in Enterprises <br />Effective Control<br />Disadvantages <br />Based on assumptions <br />Based on past data<br />Not Full Proof<br />Inadequate data <br />
  13. 13. Types of Forecasting <br />1) Qualitative – These rely on experts opinion in making a prediction for the future . These are useful for intermediate to Long range forecasting<br /><ul><li> 1)Consumers Survey Methods – Surveys are conducted to collect information about future purchase plans of the probable buyers of the product .
  14. 14. 2) Sales Force Opinion Method – In this method opinion of the salesmen is sought. & each sales person in the company to make as individual forecast for his or her particular sales territory
  15. 15. 3) Delphi Technique – This method is also as Expert Opinion Method of investigation. In this method instead of depending upon the opinions of buyers & salesmen , firms can obtain views of the specialists or experts in their respective fields. Opinions of different experts are sought & analyzed
  16. 16. 4) Past Analogy – For forecasting the sales of a new product , an analogy of the sales growth of other existing products . Example Watch company planning to launch designer watches may study buying patters of customers for fashionable sunglasses or clothes </li></li></ul><li> Types of Forecasting <br />2) Quantitative – <br /><ul><li>Time Series - Simple average method, Semi average , Moving average , Exponential smoothing ,
  17. 17. Linear Regression
  18. 18. Trend Projection
  19. 19. Econometric Model </li>