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    Outline For Today: Definition of Forecasting Elements of Forecsting Significance of Forecasting

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    Siddharth Mohapatra
    Demand forecasting is a scientific approach to anticipating future demand for a product based on past trends, data, and related events. It allows organizations to plan production, purchasing, funds, and prices. A good forecast is timely, accurate, reliable, expressed meaningfully, and in writing. Forecasting involves preparing by studying the company, market, and industry; establishing future expectations with key personnel; comparing actual to estimated results; and refining forecasts based on deviations. Forecasting helps fulfill objectives, prepare budgets, stabilize employment and production, expand organizations, make management decisions, evaluate performance, and help governments plan trade. Steps in forecasting include determining objectives, items to forecast, time horizon, models, gathering data, validating models,

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    Outline For Today: Definition of Forecasting Elements of Forecsting Significance of Forecasting

    Uploaded by

    Siddharth Mohapatra
    15 views16 pages
    Demand forecasting is a scientific approach to anticipating future demand for a product based on past trends, data, and related events. It allows organizations to plan production, purchasing, funds, and prices. A good forecast is timely, accurate, reliable, expressed meaningfully, and in writing. Forecasting involves preparing by studying the company, market, and industry; establishing future expectations with key personnel; comparing actual to estimated results; and refining forecasts based on deviations. Forecasting helps fulfill objectives, prepare budgets, stabilize employment and production, expand organizations, make management decisions, evaluate performance, and help governments plan trade. Steps in forecasting include determining objectives, items to forecast, time horizon, models, gathering data, validating models,

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    6- (27th july)

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    Demand forecasting is a scientific approach to anticipating future demand for a product based on past trends, data, and related events. It allows organizations to plan production, purchasing, funds, and prices. A good forecast is timely, accurate, reliable, expressed meaningfully, and in writing. Forecasting involves preparing by studying the company, market, and industry; establishing future expectations with key personnel; comparing actual to estimated results; and refining forecasts based on deviations. Forecasting helps fulfill objectives, prepare budgets, stabilize employment and production, expand organizations, make management decisions, evaluate performance, and help governments plan trade. Steps in forecasting include determining objectives, items to forecast, time horizon, models, gathering data, validating models,

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    Download as pptx, pdf, or txt
    15 views16 pages

    Outline For Today: Definition of Forecasting Elements of Forecsting Significance of Forecasting

    Uploaded by

    Siddharth Mohapatra
    Demand forecasting is a scientific approach to anticipating future demand for a product based on past trends, data, and related events. It allows organizations to plan production, purchasing, funds, and prices. A good forecast is timely, accurate, reliable, expressed meaningfully, and in writing. Forecasting involves preparing by studying the company, market, and industry; establishing future expectations with key personnel; comparing actual to estimated results; and refining forecasts based on deviations. Forecasting helps fulfill objectives, prepare budgets, stabilize employment and production, expand organizations, make management decisions, evaluate performance, and help governments plan trade. Steps in forecasting include determining objectives, items to forecast, time horizon, models, gathering data, validating models,

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    You are on page 1of 16

    Dt.

    27th july 2020


    SUB-S&OP
    Ananta Prasad Nanda
    Associate Prof.(OM)
    Outline For Today:
    Definition of forecasting
    Elements of forecsting
    Significance of forecasting
     FORECASTING:

    Forecasts are becoming the lifetime of business in a


    world, where the tidal waves of change are sweeping the
    most established of structures, inherited by human society.
    Survival in this age of economic predators, requires the
    tact, talent and technique of predicting the future.
    It refers to a scientific and creative approach for
    anticipating the demand /sales of a particular commodity
    in the market based on past behaviour, experience, data
    and pattern of related events. It is not based on mere
    guessing or prediction but is backed up by evidence and
    past trends.
     Cont…….
    Demand forecasting enables an organization to
    take various business decisions, such as planning
    the production process, purchasing raw materials,
    managing funds, and deciding the price of the
    product. An organization can forecast demand by
    making own estimates called guess estimate or
    taking the help of specialized consultants or
    market research agencies
    Elements Of a Good Forecast:
     The forecast should be timely. ...
     The forecast should be accurate, and the degree
    of accuracy should be stated. ...
     The forecast should be reliable; it should work
    consistently. ...
     The forecast should be expressed in meaningful
    units. ...
     The forecast should be in writing.
     J.W. Redfield describes the following elements of
    forecasting process:
     1. Prepare the groundwork.
     2. Establishing future business.
     3. Comparing actual with estimated results.
     4. Refining the forecasts.
     1. Prepare the Groundwork:
     The group work preparation requires a thorough
    study, investigation and analysis of the company, its
    products, its market share, its organisational structure
    and the industry. The investigation will involve the
    past performance of all these factors, their growth
    over a period of time and the extent of their inter-
    relationships and inter-dependence. The aim is to
    build a foundation on which future estimates can be
    based.
     2. Establishing Future Business:
     The future expectancy of the business can be
    reasonably computed from the past data as well as
    the input from the key executives of the organisation,
    sales personnel and other specialists.
     This forecast is developed with the participation of
    the key personnel and is officially communicated to
    all. Thus all these people assume responsibility for
    meeting these forecasts and accountability for any
    deviations from this forecast.
    3. Comparing Actual with Estimated Results:
     The forecast estimates over the future years provide
    benchmarks against which the actual growth and
    results can be measured and compared. If there are
    significant variations between the two, one way or
    another, the reasons for such deviations can be
    investigated and analysed.
    4. Refining the Forecasts:
    In the light of any deviations found, the forecast can
    be refined to be more realistic. If some conditions have
    changed during the periodic evaluation, then the new
    values of the variables can be incorporated in the
    estimates.
    Significance of Demand Forecasting:
     Demand plays a crucial role in the management of
    every business. It helps an organization to reduce risks
    involved in business activities and make important
    business decisions. Apart from this, demand
    forecasting provides an insight into the organization’s
    capital investment and expansion decisions
     i. Fulfilling objectives:
     Implies that every business unit starts with certain
    pre-decided objectives. Demand forecasting helps in
    fulfilling these objectives. An organization estimates
    the current demand for its products and services in the
    market and move forward to achieve the set goals.
    For instance, an organization has set a target of
    selling 50, 000 units of its products. In such a case, the
    organization would perform demand forecasting for its
    products. If the demand for the organization’s products
    is low, the organization would take corrective actions,
    so that the set objective can be achieved
     ii. Preparing the budget:
     Plays a crucial role in making budget by estimating
    costs and expected revenues.
    For instance, an organization has forecasted that the
    demand for its product, which is priced at Rs. 10,
    would be 1,00,000 units. In such a case, the total
    expected revenue would be 10* 100000 = Rs. 10, 00,
    000.
    In this way, demand forecasting enables
    organizations to prepare their budget.
     iii. Stabilizing employment and production:
     Helps an organization to control its production and
    recruitment activities. Producing according to the
    forecasted demand of products helps in avoiding the
    wastage of the resources of an organization. This
    further helps an organization to hire human resource
    according to requirement.
    For instance, if an organization expects a rise in the
    demand for its products, it may opt for extra labor to
    fulfill the increased demand.
     iv. Expanding organizations:
     Implies that demand forecasting helps in deciding
    about the expansion of the business of the
    organization. If the expected demand for products is
    higher, then the organization may plan to expand
    further. On the other hand, if the demand for products
    is expected to fall, the organization may cut down the
    investment in the business.
    For instance,covid-19
     v. Taking Management Decisions:
     Helps in making critical decisions, such as
    deciding the plant capacity, determining the
    requirement of raw material, and ensuring the
    availability of labor and capital.
    vi. Evaluating Performance:
     Helps in making corrections.
    For instance, if the demand for an organization’s
    products is less, it may take corrective actions and
    improve the level of demand by enhancing the
    quality of its products or spending more on
    advertisements.
    vii. Helping Government:
    Enables the government to coordinate import and
    export activities and plan international trade.
     STEPS USED IN FORECASTING SYSTEM:
    Determine the objective of forecast.
    Identify items to be forecast
    Determine the time horizon
    Select the forecasting model(s).
    Gather data(s).
    Validate the model.
    Makes forecast and implement result.

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