Forecasting

Forecast is a statement about the future value of a variable of interest such as demand.
 Forecasting is used to make informed decisions.
 Long-range
 Short-range

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Approaches of Forecasting (3 Types of Forecasting Techniques):

1. Judgmental forecasts: uses subjective inputs. Judgmental forecasts are useful when need
to make a quick forecast or if historical data is not available.
2. Time Series Forecasts: uses historical data assuming the future will be like the past.
3. Associative models: uses explanatory variables to predict the future

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Judgmental Forecasts (SUMMARY)

Judgmental forecasts rely on subjective inputs from various sources. Judgmental forecasts are
useful when need to make a quick forecast or if historical data is not available.
Judgmental forecasts include executive opinions, sales-force opinions, consumer surveys, and
the Delphi method.
Executive opinions utilize a small group of upper-level managers to develop a forecast.
Sales-force opinion method uses the sales staff or the customer service staff to make forecasts
based on information obtained through direct contact with customers.
Consumer surveys are used to gather information directly from customers to generated a
forecast.
Delphi method
 Opinions of managers and staff
 Achieves a consensus forecast
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Steps in the Forecasting Process:
Step 1: Determine purpose of forecast
Step 2: Establish a time horizon
Step 3: Select a forecasting technique
Step 4: Obtain, clean and analyze data
Step 5: Make the forecast
Step 6: Monitor the forecast