forecasting

BY ,
ABDUL LATHIF . K
NAVEEN . K
What is forecasting??
ØForecasting is the science of predicting future outcomes. In business,
it applies to the future of a business, product, or industry. It's
extremely important for a business to do proper forecasting before
developing new products or product lines, lest you spend a lot of
time and money developing a product that fails in the marketplace.

. process of predicting a future event. Sales will be $200

• Million!
What is forecasting??
FORECAST:
A statement about the future value of a
variable of interest such as demand.
Forecasts affect decisions and activities
throughout an organization
ØAccounting, finance
ØHuman resources
ØMarketing
ØMIS
ØOperations
ØProduct / service design
 Uses of forecasts
Accounting Cost/profit estimates

Finance Cash flow and funding

Human Resources Hiring/recruiting/training

Marketing Pricing, promotion, strategy

MIS IT systems, services

Operations Schedules, workloads

Product/service design New products and services

orecasts
.
by time horizo
Ø Short-range forecast
•

 Job scheduling, worker assignments

Ø Medium-range forecast
•

 Sales & production planning, budgeting

Ø Long-range forecast
•

 New product planning, facility location

orecasts
. by item forecasts
 Economic forecasts
 Address business cycle
 e.g., inflation rate, money supply etc.
 Technological forecasts
 Predict technological change
 Predict new product sales
 Demand forecasts
 Predict existing product sales
•
Indian cement
. industry
Ø growth of Indian cement industry
§ 2006-07 - 155 million metric tons
§ 2007-08 - 170 million metric tons
§ 2008-09 - 181 million metric tons
§ 2009-10 - 192 million metric tons
Ø Forecasting of cement industry
§ 2010-11 - 236.16 MMT
§ 2011-12 - 262.61 MMT
§
q
q
Elements of good forecasts
.

Timely

Reliable Accurate

s e
u l u
f
ng Written to
n i y
a a s
Me E
Steps in forecasting
.
.

“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
Types of forecasting
.
Judgmental - uses subjective inputs
Time series - uses historical data assuming the
future will be like the past
Associative models - uses explanatory
variables to predict the future

Judgmental forecasting
.
Executive opinions

Sales force opinions

Consumer surveys

Outside opinion
•


Time series forecasting
.
Trend - long-term movement in data
Seasonality - short-term regular variations in
data
Cycle – wavelike variations of more than one
year’s duration
Irregular variations - caused by unusual
circumstances
Random variations - caused by chance
.
Forecasts variations
. Irregula
r
variatio
n
Tre n d

Cycles

90
89
88
Seasonal variations
.
•

• THANKS FOR YOUR TIME