The document discusses the definition, purpose, and nature of forecasting, outlining its importance in predicting future events based on historical data or subjective intuition. It categorizes forecasting into three time horizons: short-range (up to 1 year), medium-range (3 months to 3 years), and long-range (3 years or more), each serving different planning needs. Additionally, it details the types of forecasts such as economic, technological, and demand forecasts, and presents a seven-step process for effective forecasting.

1. DEFINITION, PURPOSE & NATURE
TYPES OF FORECASTING
FORECASTING TIME HORIZONS
7 STEPS - FORECASTING
FORECASTING

2. FORECASTING is the art and science of predicting future events.
Making good estimates is the main purpose of forecasting.
 FORECASTING may involve taking historical data (e.g. past sales) and projecting them into the future
with a mathematical model.
 It may be a subjective or an intuitive prediction (e.g., “this is a great new product and will sell 20% more
than the old one”).
 It may be based on demand-driven data, such as customer plans to purchase, and projecting them into the
future.
DEFINITION, PURPOSE & NATURE OF FORECASTING

3. FORECASTING TIME HORIZONS
1. SHORT-RANGE FORECAST:
This forecast has a time span of up to 1 year but is generally less than 3 months. It is used for
planning, purchasing, job scheduling, workforce levels, job assignments, and production levels.
2. MEDIUM-RANGE FORECAST:
A medium-range, or intermediate, forecast generally spans from 3 months to 3 years. It is useful
in sales planning, production planning and budgeting, cash budgeting, and analysis of various
operating plans.
3. LONG-RANGE FORECAST:
Generally 3 years or more in time span, long-range forecasts are used in planning for new
products, capital expenditures, facility location or expansion, and research & development.

4. 1. ECONOMIC FORECASTS :
Addresses the business cycle by predicting inflation rates, money supplies, housing starts,
and other planning indicators.
2. TECHNOLOGICAL FORECASTS:
Are concerned with rates of technological progress, which can result in the birth of
exciting new products, requiring new plants and equipment.
3. DEMAND FORECASTS:
Are projections of demand for a company’s products or services.
Demand-driven forecasts
drive a company’s production, capacity, and scheduling systems and serve as inputs to
financial, marketing, and personnel planning.
TYPES OF FORECASTING

5. 7 STEPS IN FORECASTING
• ABC company takes into account the sales of specific products.
SELECT THE ITEMS TO BE FORECASTED:
• Sales of the newly design item needs to be predicted.
DETERMINE THE TIME HORIZON OF THE FORECAST:
• Select the proper time horizons for forecasting the sales of the items; e.g. monthly, quarterly, annually.
SELECT THE FORECASTING MODEL(S):
• Select the proper statistical model.
DETERMINE THE USE OF THE FORECAST:

6. GATHER THE DATA NEEDED TO MAKE THE FORECAST:
• Data collection with the help of different channels, say surveys.
MAKE THE FORECAST:
• Do it.
VALIDATE AND IMPLEMENT THE RESULTS:
• Review the results and set future projections.
7 STEPS IN FORECASTING

7. For complete video lecture on this ppt in Hindi/Urdu,
Go on the below mentioned link
https://www.youtube.com/watch?v=mblS9J-pyMg