FORECASTIN

SUBMITTED BY
PRACHI SHARMA
MBA 2ND SEM
310086
 Meaning
Forecasting, the process of making statements about events
which have not yet been observed.

 Forecasting is defined as, “Estimating the future demand for

products & services and the resources necessary to produce
these outputs”.
 To maximize gain from
internal environment

To maximize gain
from external To minimize losses
environment associated with
Reasons for uncontrollable events
demand
forecasting

To offset the
To provide adequate
competition of
staff to support
competitor organization
production requirement

To develop plans and

policies for the
organisation
Elements of Good Forecast

Timely

Reliable Accurate

l s e
f u u
n g Written to
ni y
a s
Me Ea
 Forecasting Methods

•Quantitative Methods/ time series method

•Qualitative or Judgmental Methods

 Qualitative Method
Qualitative methods are subjective in nature and are at times based upon
the judgment of experts. These methods are suitable when there is no
historical data available for quantitative analysis and the forecast have to
be prepared quickly in a shorter period.
The various methods of qualitative analysis are:-

•Sales force composite

•Customer surveys
•Executive opinion
• Past Analogy
•Delphi method
1.Customer Survey:
2.Sales force Composite:
Less expensive, Sales force of a company is in
direct contact with the customers.
3.Executive opinion:
A jury of the company from different functional
areas such as marketing, finance, HR, production etc give their opinion
together for the forecasting of a new product launch.
4. Delphi method :
Various experts are sent questionnaires to seek their
opinion on the forecasting of a products. Here the experts are
technology forecasters, sales persons with varied experience.
5. Past Analogy:
In this method the forecasting is done on the basis of the
sales growth of other existing products.
 Quantitative methods
Quantitative methods uses two types of techniques for demand
forecasting: time series analysis and casual analysis
1.Time series analysis:
It uses historical demand data with respect
to time interval in the past to make predictions about the future
demand
1. Simple moving average
2. Simple exponential smoothing
2. Trend analysis:
In this method we perform demand
forecasting using a cause and effect relationship. Eg.: Sales of
raincoat and umbrellas depend upon the level of rainfall in the
past few days.
 Quantitative Method

Irregular
variation

Trend

Cycles

90
89
88
Seasonal variations
Steps in the Forecasting Process

“The forecast”

Step 6 Monitor the forecast

Step 5 Prepare the forecast
Step 4 Gather and analyze data
Step 3 Select a forecasting technique
Step 2 Establish a time horizon
Step 1 Determine purpose of forecast