Abstract
This Paper examines and compares various forecasting techniques used for qualitative and quantitative business forecasting and their use in Firstlogic Inc., to forecast the demand under conditions of uncertainty. Time series and Delphi forecasting methods are considered for this research to evaluate their ability to make effective decisions regarding the future.
Business Forecasting
Business forecasting is the process of studying historical performance for the purpose of using the knowledge gained to project future business conditions so that decisions can be made today that will aid in the achievement of established goals. Forecasting plays a crucial role in today 's uncertain global marketplace. Forecasting is traditionally
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This group then feeds back the responses to other members of the group, while never giving away the identity of the response. The experts are then asked to respond again, after reviewing the responses of other respondents. This process may continue until a consensus is reached among the group. The group may be united to form a final consensus (Namvar, 2000, p.8). Time Series Forecasting Method
Time series techniques are the most popular quantitative method. These techniques use statistical methods for projecting from historical data. Quantitative techniques are preferred when appropriate data are available. The main assumption is that the historical pattern will continue into the future. The two main types of time series forecasting are average smoothing and exponential smoothing. The moving average is simply a series of arithmetic averages. Predicting sales for next year is simple. The actual sales for a certain number of years is added, and then divided by the number of years used to get the moving average. A weighted moving average is obtained by assigning a specific weight to previous years. The sum of all weights must equal one. Recent years are given a higher weight (Namvar, 2000, p.13).
Exponential smoothing is simply a subtype of the weighted moving average. A new forecast is a weighted sum of actual variables (usually sales) in the current year and the weighted forecast of
Data, the data that is currently being used in the forecasting is outdated. Using data from 2006 does not translate the current needs of customer demand. Using updated data should help with making correct estimates how much inventory should be kept on hand without causing lose in revenue.
The current demand forecasting method is based on qualitative techniques more than quantitative ones. If the forecast is not accurate, the company would carry both inventory and stock out costs. It might lose customers due to shortage of supply or carry additional holding costs due to excess production. If the actual demand doesn’t match the forecast ones, and the forecast was too high, this will result in high inventories, obsolescence, asset disposals, and increased carrying costs. When a forecast is too low, the customer resorts to a competitive product or retailer. A supplier could lose both sales and shelf space at that retail location forever if their predictions continue to be inaccurate. The tolerance level of the average consumer
* Forecasting is an impartial strategic ingredient that will ensure apt base for reputable planning. Our forecast is always the first step in developing plans in running the business along with our future plans of growth strategies. With this tool, we are able to anticipate our sales within reason that then can allow for us to control our costs in conjunction with inventory which will then help us to enhance our customer service. Sales forecasting is a vital strategic tactic in our company’s methodology.
Greaves provided five years and two months of annual sales data. Using Stat Tools, the following analysis were run: Moving Average, Exponential Smoothing Simple, Exponential Smoothing Holt’s, and Exponential Smoothing Winter’s. Following a comparison on the average on all models, the Exponential Smoothing Winter’s was found to be the most suitable model for the case. A graph
The full report shows all the forecasting data for 2012 – 2016, it clearly estimate the financial trend of our company (attachment). For the data used in this model, some of them are current data, the other are historical or most recently or average number. It only depends on actually situation – for which method is much more realistic.
Forecasting is the methodology utilized in the translation of past experiences in an estimation of the future. The German market presents challenges for forecasting techniques especially for its retail segment. Commercially oriented organizations are used to help during forecasting as general works done by academic scientists are not easy to come across (Bonner, 2009).
Fixing the forecasts allows to build the communication between the different departments of a firm (communication between the operational staff, the financial staff, etc.). It should be also a guide for financial planning and monitoring the activity and the performance. It is a tool to evaluate profitability and productivity, to identify an eventual gap between actuals and OP (operating plan), and to fix it.
Guidelines and examples to improve efficiency of other organizations that don’t use these methods by adopting these forecasting practices.
M&L Manufacturing Company is an example of a company that could benefit from forecasting. In the past the company has made an educated guess to determine necessary production for
But even this is not possible in case of a new product or innovation. A forecast of sales, demand, cash, requirements and several such business valuables are extremely essential for a business in order to be able to appropriately plan and conduct its operations in an effective and efficient manner. Yet, forecasts cannot be made accurately as there are several factors and changes in the current environment that leads to variations in forecasts and impacts or causes a manager to make changes in the forecasts.
Forecasting involves using past data to generate a number, set of numbers, or scenario that corresponds to a future occurrence. It is absolutely essential to short-range and long-range planning.
* Here you should include a simple table showing the years and the total sales for each year, along with a brief explanation of why sales are expected to rise, fall, change, or stay the same in certain years. Provide a brief explanation of the sales forecast, indicating why you expect sales to rise or fall during the planning horizon. Your explanation should be consistent with the trends and changes in sales found in your table:
Based on the case, there were two fundamental changes to standardize and improve the accuracy of forecasts. The first area was to "switch the focus of the focus of the forecasting process from sell-in to sell-through". This meant tracking closely what was sold in one region and shipped from another made forecasting market demand a more accurate exercise. The second area centered on ignoring capacity constraints to estimate demand. In the past, "forecasting was affected by perceptions of present and future supply chain capacity".
Business forecasting is the process of studying historical performance for the purpose of using the information gained to project future business conditions so that decisions can be made today that will assist in the achievement of certain goals. Forecasting involves taking historical date and using it to project future data with a mathematical model. Forecasts are extensively used to support business decisions and direct the work of operations managers. In this paper I will introduce different types of forecasting techniques.
Use for Forecasting – The impact of external forces makes it difficult to use the PLC as a forecasting tool. For instance, market factors not directly associated with the marketing activities of market competitors, such as economic conditions, may have a greater impact on reducing demand than customers’ interest in the product. Consequently, what may be forecasted