FORECASTING

1.Meaning of Forecasting
2.Factors involved in Demand Forecasting
3.Forecasting Time Horizons
4.Types of Forecasts
5.Elements of a good Forecast
6.Forecasting of a New Product
7.Steps in the Forecasting Process
 Meaning of Forecasting
Forecasting means:


Ø The first step in planning.

Ø Estimating the future demand for products and
services and the resources necessary to
produce these output.
Ø An art and science of predicting future events.
 Factors involved in
Demand Forecasting
1.How far ahead ?
a)Long-term: e.g. petroleum, paper, shipping,
Tactical decisions. Within the limits of
resources already available.
b)Short-term : e.g. clothes, Strategic decisions,
extending or reducing the limits of resources.
2.Undertaken at three levels;
a)Macro-level
b)Industry level e.g. Trade Associations
c)Firm level
3.Should the forecast be general or specific
(Product-Wise) ?


a)
Cont…
4.Problems or methods of Forecasting for “new”
vis-à-vis “well established” products.
5.Special factors peculiar to the product and the
market – risk and uncertainty. (e.g. Ladies’
dresses)
 Forecasting Time Horizons
 According to the time period forecasting
can be of three types:
1.Short-range forecast :
Its period mean a few weeks or a
few month. Its purpose is
a)Estimate inventory requirement.
b)Providing transport facilities.
c)Decide work load for man and machine.
d)Deciding the working capital required.
e)Deciding the required overtime.
f) Determining appropriate price policy.
Cont…
2.Intermediate-range forecasting:
Its period may be a few weeks or
uptoone year. Its purpose is
a)Determine dividend financing.
b)Determine schedule of operation.
c)Deciding the budgeting control over expenses.
4.Long-range forecasting :
Its period may be a few year.
Its purpose is
a)Plans for future.
b)Man power requirement.

Cont…
c)Deciding the expected capital required to meet
the expenses.
d)Plan for material required.
e)Plan for research and development.

Types of forecast
1.Technological forecasts :
Concerned with rates of
technological progress.
2.Economic forecasts :
Statement of expected future business
conditions.
3.Demand forecasts :
Projections of demand for a
company’s products or services throughout
some future period.
4.
5.
Elements of a good
forecast
The forecast should be timely.
The forecast should be accurate.
The forecast should be reliable.
The forecast should be expressed in
meaningful units such as rupees, units of
products, machines and skills needed.
The forecasting techniques should be simple to
understand and use (comfortable for users).
 Forecasting of New
Product
 It is very difficult to forecast the demand of a new
product as compared to the existing one. There are a
number of method used some of them are:
1.Direct market survey:
In this method the potential
customers are contacted personalyand the
information regarding the product is being
extracted. This will be done with the help of
questionary collected is then anyalsised to
make the forecaste. This is a time consuming
and costly method.
2.Indirect market survey :
In this method the required
information is collected from the product
representative like Wholeseller, Distributor or
Retailer. The required data is being collected
and then analysis to get the required
information.
Cont…
3.Comparing with related product :
In this method the sells data or the
demand data for the existing product is
being collected which act as a guidline for
making the forecast for our new product.
4.Limited market trial:
In this method a sample is
manufacture, produce to test the market
and to acquire the customer view. After
getting the customer feedback the forecast
for the new product can be made.
Steps in the forecasting
process
1.Determine the purpose of the forecast :
What are the objectives of
forecasting? When the forecasts are
needed?
2.Select the items for which forecasts are
needed : Determine whether the forecast is
needed for single product or for a group of
products.
3.Determine the Time Horizon for the
forecast : Is it short term, medium-
term or long-term? The forecast must
indicate the time horizon and whether to
develop forecasts weekly, monthly,
Cont…
4.Select the forecasting model :
Determine whether to use statistical
models(quantitative) including moving
averages, exponential smoothing and
regression analysis or qualitative techniques
like market research.
5.Gathering information to be used into the
forecast : The data may be collected by two
sources :
a)Primary sources
b)Secondary sources
8.Making the forecast : Using the selected
method.
9.Monitor the forecast : To determine whether it is
Question ???
Thank
you