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Nayra Franchesca M.

Dizon III A2

Chapter 3 Forecasting

Case Study/Insight

When we talk about forecasting, it isnt about predicting the number of floods
and rains that will occur in the future time. Sometimes, it is about making
predictions of the future based on past and present data which is commonly by
analysis of trends. It can also be a statement about the future value of a
variable of interest such as demand. Forecasts are vital to every business
organization and for every significant management decision. While a forecast is
never perfect due to the dynamic nature of the external business environment,
it is beneficial for all levels of functional planning, strategic planning, and
budgetary planning. Decision-makers use forecasts to make many important
decisions regarding the future direction of the organization. Forecast has many
uses when it comes to production management, it can be related to
accounting and finance it which you will estimate the cost and profit; while in
finance is about the cash flows and funding. When forecasting data it should be
accurate and timely because the accuracy of the information must be stated. It
also should be reliable, it must be consistent. It must be express meaningful units.
The terms that would be used should be simple to understand and easy to use.
And lastly, it must be cost-effective. Forecast errors are the difference between
the forecast value and what actually occurred. All forecasts contain some
degree of error, however, it is important to distinguish between sources of error
and measurement of error. Sources of error are random errors and bias. Various
measurements exist to describe the degree of error in a forecast. Bias errors
occur when a mistake is made, i.e., not including the correct variable or shifting
the seasonal demand. Random errors cannot be detected, they occur
normally.