FORECASTING

FORECASTING

1. what is

   • Process of predicting a future event
   • Underlying basis of all business decisions
     • Production
     • Inventory
     • Personnel

2. Time horizons

   • Short-range forecast
     • 1 year, generally less than 3 months
     • Job assignment
   • Medium-range forecast
     • 3 months to 3 years
     • Sales
     • Production planning
   • Long-range forecast
     • 3 years
     • New product planning
     • Location

3. Types

   • Economic
     • Address business cycle
     • Inflation rate
   • Technological
     • Impacts development of new product
   • Demand
     • Sales of existent products
     • Services

4. Strategic importance

   • Suplly chain management
     • Cost
     • Product innovation
     • Speed to market
   • Human resurse
     • Laying off workers
     • Hiring
   • Capacity
     • Loss of customers
     • Loss of market share

5. Qualitative Methods

   • Used when situation is vague
     • Experience
     • New products

6. Quantitative Methods

   • Used when situation is ‘stable
   • Involves mathematical techniques
   • Existing products

7. Time-series

   • Trend component
     • Changes due to population
     • Typically several years duration
   • Seasonal
     • Regular pattern of up
     • Due to weather
   • Random
     • Unsystematic
     • Short duration
     • Due to random variation or unforeseen events
   • Cyclical
     • Affected by business cycle
     • Multiple years duration
     • Often causal or associative relationships

8. Sales Force

   • Combined at district
   • Sales reps know customers’ wants
   • May be overly optimistic

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