MANAGEMENT CONCEPTS AND

PRACTICES
TOPIC : FORECASTING

BY: NISCHAL G
SUBMITTED TO : DR.SATYA SIDHARTHA PANDA

FORECASTING

Meaning
To Predict or estimate a future event

Definition
A planning tool that helps management in its
attempts to cope with the uncertainty of the
future, relying mainly on data from the past
and present and analysis of trends.

FEATURES OF FORECASTING
Forecasting is concerned with future events.

 It shows the probability of happening

of future events.

It uses personal observations

It uses statistical tools and techniques.

It analyses past and present data.

Types of Forecasting Methods

1. Qualitative or Judgmental method
2. Quantitative method

Qualitative forecasting method

often called as judgmental method, is a
method in which the forecast is made
subjectively by the forecaster. They are
educated guesses by forecasters or experts
based on intuition, knowledge, and
experience.

Three important Qualitative methods are :1. Delphi Technique - Develop forecast through group
consensus.

2. Market Surveys Involves the use of questionnaires, consumer

panels & tests of new products & services

3. Scenario Writing - process of analyzing possible future events by

considering alternative possible outcomes.

Quantitative method
method of prediction which assumes that the patterns that
existed in the past will continue on into the future, and that
those patterns are regular and can be measured.
The objective of this method is to identify the pattern in
historic data & extrapolate this for future.

Types of Quantitative method

1. Moving Average Method - average of demands occurring in
several of the most recent periods.

 Weighted moving Average - allows for varying weighting of old

demands.

 Exponential Smoothing - exponentially decreases the weighting

of old demands.

 regression analysis - a functional relationship is established

between variables from the historical data and then used to
forecast dependent variable values.

Relationship between Planning and

Forecasting

Forecasting is about predicting the future as accurately as possible,

given all of the information available, including historical data and
knowledge of any future events that might impact the forecasts.
Planning is a response to forecasts and goals. Planning involves
determining the appropriate actions that are required to make your
forecasts match your goals.

 Forecasting is the essence of planning. In fact, forecasting is so essential to

sound planning that it would not be an exaggeration to state that the success of
the plan depends in a large measure upon the validity and accuracy of the
forecast.
Forecasting as an Aid to Planning
Forecasting is nothing but prophesying the future. The element of error and risk is
inevitable. But there is no way for escaping from this. The best alternative would
be to make use of the existing forecasting instruments in a judicious manner, in a
discriminating way, allowing for the risk factor involved and plan accordingly.
Planners, in majority of cases, do not know with certainty the conditions which
will exist in future, when activities take place. As a result, they are forced to make
certain assumptions regarding future. This is forecasting. Forecasting provides
pertinent information for successful planning. Planning without forecasting
proves to be wasteful and useless.