Prepared By: Ali Siddiqi

Forecasting What is forecasting? The art and science of predicting future events Historical Data Intuition Combination of both Expensive Only an estimate till real amounts of demand and other events are known Prepared By: Ali Siddiqi

Forecasting What is forecasting? Critical to success Basis of all business decisions Different methods for different companies and/or departments Prepared By: Ali Siddiqi

Forecasting Time Horizons Forecasting can be classified into 3 major future time horizons: i. Short-range forecasting ii. Medium-range forecasting iii. Long-range forecasting Prepared By: Ali Siddiqi

Short-Range Forecasting Up to one year Generally less than 3 months Used for planning of Purchasing Job Scheduling Workforce levels Job Assignments Production levels Prepared By: Ali Siddiqi

Medium-Range Forecasting Between 3 months to 3 years AKA Intermediate Planning Used for : Sales planning Production planning and budgeting Cash budgeting Analysis of various operating plans Prepared By: Ali Siddiqi

Long-Range Forecasting Usually, 3 years or more Used for planning: New products Capital ventures Facility location or expansion Research and development (R&D) Prepared By: Ali Siddiqi

Short-Range vs. Medium and Long- Range Forecasting Short-Range ForecastingMedium and Long-Range Forecasting Deals with less complex issues. Deals with more comprehensive and complex issues, providing management support to make these decisions. Uses mathematical techniques to provide forecasts. Mathematical techniques are generally not applied. More accurate. Specially due to period of time. Less accurate. Due to large span of time. Needs constant updates. Prepared By: Ali Siddiqi

Forecasting and Product Lifecycle Product lifecycle has 4 stages i. Introduction ii. Growth iii. Maturity iv. Decline Longer Forecasts for: Introduction & Growth Shorter Forecasts for: Maturity & Decline Prepared By: Ali Siddiqi

Types of Forecasting Economic Forecasts: Make predictions about the economy as a whole or in part Help in intermediate to long-range forecasts Technological Forecasts: Make predictions about technological progress Help in long-range forecasts Prepared By: Ali Siddiqi

Types of Forecasting Demand Forecasts AKA Sales Forecasts Project demand for the company’s products and/or services Help in all three time horizon forecasting Prepared By: Ali Siddiqi

Strategic Importance of Forecasting Human Resources Hiring Training Laying off Capacity Shortages Surplus Prepared By: Ali Siddiqi

Strategic Importance of Forecasting Supply Chain Management Accurate forecasts means accurate orders Specially important in firms dealing with high end suppliers Prepared By: Ali Siddiqi

Steps in the Forecasting System 1. Determine the use 2. Select the items to be forecasted 3. Determine the time horizon 4. Select forecasting models 5. Gather the data needed to make the forecast 6. Make the forecast 7. Validate and implement results Prepared By: Ali Siddiqi

Realities of Forecasting Rarely perfect Many outside factors that cannot be predicted Stability is an assumption Aggregate is closer than individual forecasts Prepared By: Ali Siddiqi

Forecasting Approaches Two general approaches: Quantitative Mathematical Formulas Used when historical data is present Existing products Qualitative Intuition, emotions, personal experiences Used when there is no historical data New products Prepared By: Ali Siddiqi