Week 1: Forecasting Management

Question 1

What is forecasting?

Answer 1

Attempt to foresee the future by examining past and present trends

Question 2

Why forecast?

Answer 2

To identify problems, opportunities, threats before they happen.

Reactive approach - be prepared for these problems, keeping in mind that everything else stays constant. Otherwise predictions not accurate.

Question 3

How do traditional models forecast?

Answer 3

Most traditional forecasting models extend historical patterns. They assume conditions of the past will be similar to the conditions of the future
- When environment changes, they perform less optimally

Question 4

How is forecasting categorised on the time horizon?

Answer 4

Short term - <3 months- 1 yr
Medium term - 3 months - 3 yrs
Long term - 3yrs +

Question 5

Examples of each time horizon

Answer 5

Short term - demand / cashflow / job scheduling
Medium term - Budget allocation/ labour market
Long term - Strategic (Environment, market conditions, technology) Product planning, Investment

Question 6

Difference between forecasting and planning?

Answer 6

Forecasting is NOT planning

Planning: how business will achieve its goals
Forecasting is an INPUT to the planning model (advice on what will happen under assumed circumstances), but is more concerned with WHAT the future will look like

Question 7

Forecasting and decision making, what is it based on?

Answer 7

Most forecasting required for decision-making is handled judgmentally

Question 8

What is quantitative forecasting?

Answer 8

Prediction derived by mathematical algorithm/ numeric data

Question 9

What is qualitative forecasting?

Answer 9

Predictions based on judgement
- NOT numerical

Question 10

What forecasting is best for short-medium predictions

Answer 10

Quantitative

Question 11

How to calculate error?

Answer 11

Actual number - Forecast