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Forecasting (1)

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Forecasting (1)

1. 1. 7 Forecasting
2. 2. I see that you will get an A in this semester.
3. 3. 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
4. 4. 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
5. 5. 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.
6. 6. ☺Analyzing and understanding the problem. ☺Developing sound foundation ☺Collecting and analyzing data. ☺Estimating future events. ☺Comparing results. Follow up action.
7. 7. Economic Forecasting Predicts what the general business Conditions will be in the future (e.g. Inflation rates, Gross National product, Tax, level of employment.) Technology Forecasting Predicts the Probability & Possible future development in Technology (e.g. Competitive advantage of firms competitors incorporation into their product & processes Demand Forecasting Predicts the Quantity & timing of demand for a Firms product.
8. 8. Forecasting methods and routes Techniques Routes Qualitative Quantitative Simple Regression Multiple Regression Time trends Moving Averages. Mathematical Formation Statistical Forecasting. Nominal Group Technique. Top-Down Routes Bottom -Up Routes Where International and National Events effect the Future Behavior of local variable Where Local Events Effect The Future Behavior Of local variable
9. 9. 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.
10. 10. 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.
11. 11.  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.
12. 12. Choosing a Forecasting TechniqueChoosing a Forecasting Technique  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
13. 13. Elements of a good forecastElements of a good forecast 1. Appropriate forecast horizon 2. Degree of accuracy should be taken into account 3. Reliable 4. Choose meaningful units (dollars versus units) 5. Use same forecast throughout organization
14. 14. CONCLUSIONCONCLUSION ““Prediction is veryPrediction is very difficult,difficult, especially if it's about theespecially if it's about the future.future.””
15. 15. Matter By :- Akanksha shrivastav Created By:- JAi NaGaWat