Essay on Business Forecasting
One of the steps, say the very first one, in the process of management is planning. Planning is understood as the process of setting goals and choosing the means to achieve these goals. Planning is essential for, without it, managers cannot organise people and resources effectively.
Meaning and Definition
Forecasting is fundamental to planning. 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. A popular definition of forecasting is that, it is estimating the future demand for products and services and the resources necessary to produce these outputs. Starting point in forecasting is sales or demand …show more content…
Forecasting methods can be broadly divided into two main categories:
• Quantitative methods
• Qualitative or judgemental methods
In some situations, a combination of methods may be used. In quantitative methods, also called time series methods, past data are used in making a forecast for the future. This process looks like driving a car by looking through the rear mirror. However, where forecast is-made for short-periods, quantitative methods are more appropriate.
Qualitative or judgemental methods rely on an expert's opinion in making a prediction for the future. These methods are useful for intermediate to long-range forecasting tasks. The use of judgement in forecasting sounds unscientific and adhoc. But, where new products are sought to be introduced, there are few alternatives other than using the informed opinion opinion of knowledgeable people. However, to obtain better results, judgemental methods are used in conjunction with other categories of methods.
Detailed description of the forecasting methods follows.
These methods seek to identify patterns in the past data. In order to