FORECASTING

Forecasts are statements about future, specifying the

volume of sales to be achieved and equipment, materials
and other inputs needed to realise the expected sales

Estimating the future demand of product, services and the

resources necessary to produce these outputs
Need for sales
Forecasting
1. Ne w Fa c ilit y Pla n n in g
2. Pro d u c t io n Pla n n in g
3. Wo rk Fo rc e Sc h e d u lin g
4. Fin a n c ia l Pla n n in g
 Types of Forecasting
1. Long range or Long term forecast
2. Intermediate range
3. Short – range forecasts


Operating managers needs long range



forecasts to make strategic decisions

about products, processes and facilities

Examples of Things that are Forecast in Production Management

Forecast Time Example of things that are Typical units of forecast

horizon span forecast
Long-range Years New product lines Rupees,
Old product lines Rupees
Factory capacities Gallons, hours, kgs, units or
customers per time period
Intermediate- Months Departmental
Capital funds capacities Hours,
Rupees strokes, kg, gallons
range Facility needs units,
Space,orvolume
customers per time
Product groups period.
Units
Workforce Workers, hours
Purchased materials Units, kgs, gallons
Inventories Units, Rupees
Forecast Time Example of things that are Typical units of forecast
horizon span forecast

Short-range Weeks Labour-skill classes Machine Workers, hours

capacities Units, hours, gallons
strokes, kgs or customers
per time period
Cash Rupees
Inventories Units, Kgs, Rupees
Specific products Units
Application of Long-range and Short-range Demand
Forecasts

(a)Long-range Forecast

1.Selecting a product design.

2.
3.Selecting a production processing scheme (i.e., process
design) for a new product.
4.
5.Selecting a plan for the long range supply of scarce
materials.
6.
7.Selecting a long range production capacity plan.
5. Selecting a long range financial plan for acquiring
funds for capital investment.
6. To build new buildings and to purchase new machines.
7. To develop new sources of materials and new sources
of capital funds (finance).
(b) Short-range Forecast

1.How much inventory of a particular product should be carried next

month?
2.
3.How much of each product should be scheduled for production
next week?
4.
5.How much of each raw material should be ordered for delivery
next week?
6.
7.How many workers should be scheduled ro work on regular time
basis and on overtime basis next week?
8.
9.How many maintenance workers should be scheduled to work next
week end?
 Forecasting Model:-
Information Inputs

Sales forecast translated into forecast of demand for operations

Long-range ForecastIntermediate range ForecastShort-range Forecast

ties Capital Funds Facility Needs

Workforce
Others Labour by Skill and
Department Capacities Purchased Materials Inventories Others
Class
Machine Capacity
Cash
Inventories
Others

Output of Goods and Services

Sources Of Data

1.Sales force estimates

2.Point of Sales (POS) Data system
3.Forecasts from supply chain partners
4.Trade / Industry Association Journals
5.B2B Portals / Market Places
6.Economic surveys & Indicators
7.Subjective Knowledge