What is Forecasting?

What is Forecasting?

Forecasting is a tool used for predicting future demand which based on past demand information. Usually the demand of product and services is uncertain. Forecasting is used for High range of strategic planning(strategic planning) , preparing budgets(finance) and cost controls (accounting), Marketing (future sales , new products) and production and operations. It is all about to predict future goals and demand.

There are two types of forecasting methods:

Qualitative methods

It depends one or more experts subjective opinions to generate forecasts. it’s generally employ the judgement of experts to predict the future demand. Advantage of these procedure is to apply in every situations where historical data are not simply available.

Market Research :  forecast the market situation and try to identify the customer taste and preference. A new product need in market.

Panel Consensus: deriving future estimations from the synergy of a panel of experts in the area.

Historical Analog: Analysing market with another similar market.  

Delphi method : it’s an attempt is made to develop forecasts through “group Consensus.”Usually, a panel of experienced people are asked to respond to a series of questionnaires.

Quantitative methods

Everything depends on data and analytical Techniques. These methods are used when historical data on variables of interest are available – these methods are based on an analysis of historical data concerning the time series of the specific variable on interest.

Time series: models that predict future demand based on past history trends. In recognition of this method’s reliance on time series of past data of the variable that is being forecasted.

Causal Relationship: models that use statistical techniques to establish relationships between various items and demand.

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