1. What is Forecasting?

Forecasting is a process or a technique that analyses past and present data to estimate
events that are predictive in determine the future. The art and science of predicting what
will happen in the future.
2. What are the types of forecasts?
Economic forecasts – A process used to predict the future condition of the economy. It is
used by business managers to help in planning for future operating activities. This
addresses the business cycle in the economy, inflation rates, money supply, housing starts
(yearly based), and other indicators.
Technological forecasts – A process help to evaluate the probability and significance of
any possible future technological development in order for managers to make significant
and better decisions. It focuses in monitoring predicting the rate of technological
progress. It can also impact the development of new products.
Demand forecasts – focuses on the company’s products and estimation of consumer
demand. It is used to predict sales of existing products and services. This tackles
scheduling, production and capacity; also, used for future marketing plans.

3. Explain the strategic importance of forecasting.

a. Forecasting with the demand determine hiring, training and lay-off of workers.
b. Through forecasting, they able to weigh the capacity. When the capacity cannot
equal to the demand, they may be loses of costumers, poor quality service,
undependable delivery and possible loss of market share. Also, excess capacity
add costs.
c. There is a good Supply Chain Management; good supplier relations and can have
advantages with price.

4. What are the seven steps in the forecasting system?

The seven steps in the forecasting system are the following:
1. Determine the use of the forecast.
2. Select the items to be forecasted.
3. Determine the time horizon of the forecast.
4. Select the forecasting model(s).
5. Gather the data.
 6. Make the forecast.
7. Validate the implement results.
5. Identify and explain the various forecasting approaches.

There are two main approaches in forecasting: Qualitative and Quantitative methods.
Qualitative Methods uses information on experiences, intuitions and instincts. The methods are
used when the situation is vague and little to no mathematical data exists. These methods include
Jury of executive opinion, Delphi method, sales force composite, and consumer market survey.
Quantitative methods relies with historical data, mathematics and other existing variables; used
when situation is stable. These methods include Time series models and associative model.