FORECASTING IN QUANTITATIVE ANALYSIS
I am highly honoured to give a presentation on forecasting. You are all welcome. Every organisation’s success depends on how well it is able to forecast. We will look at the meaning of forecast, the steps, qualitative and quantitative forecasting and finally the benefits.
The Meaning Of Forecasting
Forecasting is a process of predicting or estimating the future based on past and present data. Forecasting provides information about the potential future events and their consequences for the organisation. It may not reduce the complications and uncertainty of the future. However, it increases the confidence of the management to make important decisions. Forecasting is the basis of premising. Forecasting
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These people, who should ideally come from a variety of backgrounds (marketing, production, management, finance, purchasing, etc.) are asked to respond to an initial questionnaire. Sometimes, a second questionnaire that incorporates information and opinions of the whole group is distributed for further discussion or study. Each expert is asked to reconsider and revise his or her initial response to the questions. This process is continued until some degree of consensus among experts is reached. It should be noted that the objective of the Delphi technique is not to produce a single answer at the end. Instead, it attempts to produce a relatively narrow spread of opinions—the range in which opinions of the majority of experts lie.
Under the scenario writing approach, the fore-caster starts with different sets of assumptions. For each set of assumptions, a likely scenario of the business outcome is charted out. Thus, the forecaster generates several different future scenarios (corresponding to the different sets of assumptions). The decision maker or business person is presented with the different scenarios, and has to decide which scenario is most likely to prevail.
The subjective approach allows individuals participating in the forecasting decision to arrive at a forecast based on their feelings, ideas, and personal experiences. Many corporations in the United States have started
Forecasting is part of a company’s future planning as it attempts to estimate future demand for its product or services. Forecasting is usually measured in specific time periods (months, weeks, etc), given a desired level of accuracy, and assigned a unit of forecasting (sales in units or dollars) (Download Reports 2011). PepsiCo bases its sales forecasts on two main factors: changes in consumer tastes, particularly the rise health consciousness among consumers; and how legal regulations may impact operations, such more federal and local laws
The current demand forecasting method is based on qualitative techniques more than quantitative ones. If the forecast is not accurate, the company would carry both inventory and stock out costs. It might lose customers due to shortage of supply or carry additional holding costs due to excess production. If the actual demand doesn’t match the forecast ones, and the forecast was too high, this will result in high inventories, obsolescence, asset disposals, and increased carrying costs. When a forecast is too low, the customer resorts to a competitive product or retailer. A supplier could lose both sales and shelf space at that retail location forever if their predictions continue to be inaccurate. The tolerance level of the average consumer
The challenge in planning is that planning is essentially forecasting future actions and events. Most
* Now, assume you have acquired some time series data that would enable you to make short, medium, and long term forecasts. Ascertain the quantitative technique that will provide you with the most accurate forecast. Provide a rationale for your responses
* Forecasting is an impartial strategic ingredient that will ensure apt base for reputable planning. Our forecast is always the first step in developing plans in running the business along with our future plans of growth strategies. With this tool, we are able to anticipate our sales within reason that then can allow for us to control our costs in conjunction with inventory which will then help us to enhance our customer service. Sales forecasting is a vital strategic tactic in our company’s methodology.
First all financial forecasts must come from collaboration with operational leaders they cannot be on their own creating estimates. The key for the best forecasting is transparency leaders need business details to make decisions not just numbers so they can find the best path for growth. Business plans need to
Good information. I like how one can forecast information between relationships and different variables. Especially how easy it is to read and determine what might be the next task at hand, depending on what the end result is looking like and wanting to determine. Forecasting is part on a planning process based on predictions.
Forecasting is the methodology utilized in the translation of past experiences in an estimation of the future. The German market presents challenges for forecasting techniques especially for its retail segment. Commercially oriented organizations are used to help during forecasting as general works done by academic scientists are not easy to come across (Bonner, 2009).
Analyzing the company’s performance compared to its historical figures is always useful; nevertheless, these historical figures can be also a very useful tool to forecast future ProForma figures. We usually start by forecasting future sales (based on an average increase in sales figure) and other balance sheet and income statement items are forecasted as percentage of sales, this percent is normally consistent from historically figures. A close look should be given to the company’s operations and plan for the coming year while making our assumptions and forecasted figures. Normally we should follow
Fixing the forecasts allows to build the communication between the different departments of a firm (communication between the operational staff, the financial staff, etc.). It should be also a guide for financial planning and monitoring the activity and the performance. It is a tool to evaluate profitability and productivity, to identify an eventual gap between actuals and OP (operating plan), and to fix it.
M&L Manufacturing Company is an example of a company that could benefit from forecasting. In the past the company has made an educated guess to determine necessary production for
But even this is not possible in case of a new product or innovation. A forecast of sales, demand, cash, requirements and several such business valuables are extremely essential for a business in order to be able to appropriately plan and conduct its operations in an effective and efficient manner. Yet, forecasts cannot be made accurately as there are several factors and changes in the current environment that leads to variations in forecasts and impacts or causes a manager to make changes in the forecasts.
The company understands that in a fast changing business environment it is essential to forecast the future trends and bottlenecks thus helping them prepare for any circumstances that may come up. The 2020
Time Series and Associative models are both quantitative forecast techniques are more objective than qualitative techniques such as the Delphi Technique and market research.
Business forecasting is the process of studying historical performance for the purpose of using the information gained to project future business conditions so that decisions can be made today that will assist in the achievement of certain goals. Forecasting involves taking historical date and using it to project future data with a mathematical model. Forecasts are extensively used to support business decisions and direct the work of operations managers. In this paper I will introduce different types of forecasting techniques.