004-Forecasting Flashcards
This is the process of developing knowledgeable presumption about certain business measures
Business Forecasting
Elements of a good forecasting
- Simple to understand and use
- Flexible and adjustable
- Timely
- A line with strategic goal
- Accurate and reliable
A tool used by businesses to make well informed decisions in a variety of domains, including financial planning, operations, inventory management, and customer service.
By doing this businesses can improve productivity profitability and customer happiness to predict the future conditions and make appropriate preparations
Forecasting
A type of forecasting.
It predicts the demand for a product or service over a certain period
Demand Forecasting
A type of forecasting.
Predicts future sales volumes based on historical data, market trends, and promotional activities
Sales Forecasting
A type of forecasting
Involves projecting financial outcomes based on expected sales and operational cost
Financial Forecasting
A type of forecasting
Estimates the availability and reliability of supply sources, considering supplier capabilities, lead times, and other factors
Supply Forecasting
Advantages of Forecast
- Improve decision making
- Increase the efficiency of the use of resources
- Identify opportunities and weaknesses.
- Maintains customer satisfaction
Disadvantages of Forecasting
1.It can be costly
2. Limitations of forecasting models 3.rapid market changes
4. dependence on historical data
Six Steps in the Forecasting Process
- Determine the purpose of the forecast
- Establish a time horizon
- Select the forecasting technique
- Obtain, clean, and analyze appropriate data
- Make the forecast
- Monitor the forecast
A forecasting approach.
It relies on subjective judgment and non-numerical data to predict future events incorporating factors like emotions, experiences, behavioral patterns, an experts opinions.
Valuable for forecasting trends like new product adaptations or shift and consumer behavior prehistorical data may fall short
Qualitative Forecasting
A forecasting approach
Uses historical data or causal relationship between variables to make forecast it relies on numerical data to predict future trends.
Common methods like regression analysis, time series analysis, and econometrics are used in field such as finance in marketing
Valid for the objectivity and ability to handle large data sets
Quantitative Forecasting
A forecasting approach
The lies on subjective inputs. Including opinions from customers, survey, sales staff, managers, executives and experts to make predictions.
Used when quantitative data is unavailable, incomplete or difficult to interpret
It combines insights from individuals who have a direct experience or specialized knowledge of the market industry
Judgemental Forecasting…
* Executive Opinions: top management
* Salesforce Opinions: sales people
* Consumer Surveys:* data collected from consumers
Delphi Method: a panel of experts provide prediction anonymously.
A type of forecast where it is predicting future values based on previously observe data points collected at a regular time intervals.
It assumes that patterns or trends from the past will continue in the future
Time Series Forecast.
Methods used in time series for casting:
* Moving Averages: smooth out short term fluctuation by averaging data over a fixed period.
* Exponential Smoothing: use when there is no trend or seasonality. Gives more weight to recent observations making it responsive to changes and moving averages
* Arima (auto regressive integrated moving average): (using past values) difference ( to make the data stationary), and moving averages (to smooth the noise)
A time series behavior
It represents the long term movement or direction in the data either upward downward or flat.
It can be linear or nonlinear depending on how the data behaves over time
Trend
