Preview

Business Forecasting

Powerful Essays
Open Document
Open Document
6828 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Business Forecasting
Business Forecasting

Contents 1.0 Executive summary…………………………………………………………………………………4 2.0 Introduction……………………………………………………………………………………………5 3.0 Question 1……………………………………………………………………………………………...6 4.1 a) Time series plot…………………………………………………………………………6 4.2 b) Exponential smoothing methods……………………………………………….8 4.3 c) 8 months Forecasted period……………………………………………………11 4.4 d) Forecasting report……………………………………………………………………13 4.0 Question 2…………………………………………………………………………………………….15 5.5 Forecasting in Marketing……………………………………………………………..15 5.6 Financial Forecasting……………………………………………………………………17 5.0 Conclusion…………………………………………………………………………………………….18 6.0 Recommendations………………………………………………………………………………..18 7.0 Appendix………………………………………………………………………………………………19 8.0 References………………………………………………………………………………………….25

1.0 Executive summary
The Holt-Winters multiplicative model proved to be the most applicable method to use to forecast the data for the warehouse store sales (in million dollars) due to it being able to take into account trends and seasonality, which the other methods were not able to show. Unlike moving averages models, the data was non-stationary so the Holt-winters method proved to be the most appropriate exponential smoothing method. The trial and error approaches further validated the compatibility of the Holt-winters multiplicative method through producing the lowest accuracy measures, particularly the lowest MAPE.
The actual results showed that 6 of the 8 months produced lower sales than the forecast had predicted, hence results show that the forecasts were based on more uncertainty rather than more accurate predictions.
Nevertheless, companies require forecasts in order to plan ahead and make predictions. Even though introducing qualitative approaches will help produce more accurate forecasts but the method of predicting figures cannot be dismissed that easily.
A marketing



References: Hanke, John E (2009). Business Forecasting. 9th ed. New Jersey: Pearson Prentice Hall. Chapter 1,3 and 4. Swamidass, Paul M. (2000). Exponential smoothing methods. Encyclopedia of Production and Manufacturing Management. 1 (usa), 462. Kendall. (1984). How To Identify Patterns in Time Series Data: Time Series Analysis. Available: http://www.statsoft.com/textbook/time-series-analysis/. Last accessed 28/12/2012. Goodwin, Paul. (2010). The Holt-Winters Approach to Exponential smoothing: 50 years old and going strong. Available: http://www.forecasters.org/pdfs/foresight/free/Issue19_goodwin.pdf. Last accessed 05/01/2013. Player, Steve. (2010). Why forecasting?. Available: http://bigfatfinanceblog.com/2010/06/01/why-forecasting/. Last accessed 5th Jan 2013. Hicken, Melanie. (2012). 8 Steps Every Business Needs To Take When Forecasting Sales. Available: http://articles.businessinsider.com/2012-02-12/strategy/31051549_1_accurate-forecasting-forecasting-methods-important-forecasting. Last accessed 5th Jan 2013. Ryan, T.P.. (2003). What is Exponential Smoothing?. Available: http://www.itl.nist.gov/div898/handbook/pmc/section4/pmc43.htm. Last accessed 28th December 2012. Bowen, Ronda. (2011). The importance of business forecasting. Available: http://www.brighthub.com/office/entrepreneurs/articles/105591.aspx. Last accessed 27th December 2012. Anderson, David P., Dennis J. Sweeney, and Thomas A. Williams. (1994). Forecasting. Available: http://www.referenceforbusiness.com/small/Eq-Inc/Forecasting.html. Last accessed 2nd Jan 2013. Tim Garrison. (2012). What Form Of Financial Forecasting Works Best?. Available: http://ezinearticles.com/?What-Form-Of-Financial-Forecasting-Works-Best?&id=7174491. Last accessed 5th Jan 2013.

You May Also Find These Documents Helpful

  • Powerful Essays

    Forecasting [Web Link]. Apollo Group, Inc. Retrieved August 15, 2007, from University of Phoenix, rEsource, MBA502- Managing the Business Enterprise Course Web site.…

    • 1840 Words
    • 8 Pages
    Powerful Essays
  • Better Essays

    Forecasting Best Practices

    • 2091 Words
    • 9 Pages

    To find the "best practices" for forecasting, our team researched many cases of forecasting success, and found five companies with a common theme. Rayovac, the Coca-Cola Bottling Company, AAi. FosterGrant, the Sara Lee Corporation, and the Scotts Company all had major problems with forecasting, some of them very similar. To address and solve these problems each of these companies made major improvements to their forecasting systems. Although some used similar methods and others very different, these companies found that the right people, process and information technology was the key to efficient and accurate forecasting.…

    • 2091 Words
    • 9 Pages
    Better Essays
  • Better Essays

    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.…

    • 1499 Words
    • 6 Pages
    Better Essays
  • Good Essays

    Case Study: Nordstrom

    • 612 Words
    • 3 Pages

    According to Schermerhorn (2013), “forecasting is the ability to predict the future” (pg.123) which means that the process of forecasting can become an important tool to quantify the proper balance between supply and demand. Likewise, in order to maximize sales and its effectiveness, businesses have to work in predict the future customer demand and use this information to lead the business operations to distribution effectively. However, inaccurate forecasts happen and along with them there is a cost.…

    • 612 Words
    • 3 Pages
    Good Essays
  • Good Essays

    Aldi Forecasting

    • 793 Words
    • 4 Pages

    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).…

    • 793 Words
    • 4 Pages
    Good Essays
  • Satisfactory Essays

    Forecasting

    • 881 Words
    • 4 Pages

    In the business world today, companies use forecasting methods to implement processes and strategies in order to meet organizational goals. Forecasting will allow a company to plan for possible outcomes, making adjustments to inventory levels and staff. Through forecasting, companies will attempt to keep operating costs at a manageable level without sacrificing production and quality. The are several different types of forecasting available to companies today, each with advantages and disadvantages. The goal of any organization is to implement the forecasting method which best fits the needs of that organization. The forecasting needs and processes are different for each individual organization. Some companies will chose to maintain low inventory levels, opting for forecasting which focuses on shorter time periods; while other companies will need longer range forecasting due to maintaining higher inventory levels. Regardless of the needs, forecasting can be a useful tool for any company. We will look at objective and subjective forecasting methods, how these methods are implemented, and their effectiveness.…

    • 881 Words
    • 4 Pages
    Satisfactory Essays
  • Powerful Essays

    Forecasting Practices

    • 6633 Words
    • 27 Pages

    Abstract A survey of forecasting practices was carried out to provide a better understanding of Canadian business practices, and when possible, compare them with US practices. Companies in the US and Canada have the same use for forecasting information. Forecasts are generated and used mostly by marketing/sales. Judgmental procedures are used more frequently than any other method. Quantitative, causal and newer methods are not used as much. In line with this, "rms do not keep as much data per product/service forecasted. Senior management revises the forecast frequently and believes that on average, accuracy is improved by the revision. Calculation of improvement metrics shows that the variation in the improvement may negate the advantage gained. 2001 Elsevier Science B.V. All rights reserved.…

    • 6633 Words
    • 27 Pages
    Powerful Essays
  • Better Essays

    LALA

    • 1117 Words
    • 12 Pages

    Two factors have led to the company not employing any formal forecasting techniques. One of these is the sudden change in product mix, the other is the rapid growth has focused their attention on building capacity. The President of the company, Mr. Ralph Wada, has recognized the need for a more formal forecasting process as the company matures. He has expressed an opinion that forecasting should be as simple as possible and yet still meet the needs of the business.…

    • 1117 Words
    • 12 Pages
    Better Essays
  • Powerful Essays

    Business firms whether small or big has engaged several challenges before and after its growth. It undergoes study of the entire business. Efficient and effective decisions in business are needed to implement every day. The business manager has the responsibility to make decisions for the improvement of the company. To make this be possible, forecasting of sales is necessary.…

    • 4920 Words
    • 20 Pages
    Powerful Essays
  • Good Essays

    period of time is now viewed as a longterm career path. I recently heralded this…

    • 2154 Words
    • 9 Pages
    Good Essays
  • Good Essays

    Part one questions carry 1 mark each & Part two questions carry 5 marks each.…

    • 1369 Words
    • 8 Pages
    Good Essays
  • Powerful Essays

    Srraaa

    • 6092 Words
    • 25 Pages

    The historical data is used for extrapolating and forecasting. Either simple averages or moving averages could be used. In simple average method, for establishing the trend, the data is divided in two parts, and from the change, the trend is established. From seasonal averages, “seasonalizing indices” for seasons are calculated. For forecasting purposes, the forecast based on trend analysis is first calculated, and this forecast is then “seasonalized” by using seasonalizing factor. While using seasonal data, first data is “deseasonalized” by dividing it by the seasonalizing factor; then the forecast is made by trend analysis; and finally the forecast is “seasonalized” by multiplying by the seasonalizing factor.…

    • 6092 Words
    • 25 Pages
    Powerful Essays
  • Powerful Essays

    Techniques of Forecasting

    • 1229 Words
    • 5 Pages

    Months | Actual Values | Forecasted Values | Forecast Error | Jan | 66.1 | - | - | Feb | 66.1 | 66.1 | 0 | Mar | 66.4 | 66.1 | 0.3 | Apr | 64.3 | 66.16 | -1.86 | May | 63.2 | 65.788 | -2.588 | Jun | 61.6 | 65.2704 | -3.6704 |…

    • 1229 Words
    • 5 Pages
    Powerful Essays
  • Powerful Essays

    Fildes R. 1979. Quantitative forecasting – the state of the art: extrapolative models. Journal of…

    • 8029 Words
    • 56 Pages
    Powerful Essays
  • Good Essays

    Forecasting, in true essence, is a branch of the anticipatory sciences used for identifying and projecting alternative possible future. It plays vital role in most of our activities and in all we do concerning the future. Weather prediction, staff scheduling, business, production planning and multistage management decision analysis are among distinctive examples of forecasting areas. In such fields people want to foresee as closely as possible and plan for the future. In broad terms, a forecast is simply a statement, based upon some criteria, concerning the future condition of a system. It opens menu windows onto future. It is a medium guiding towards plans for the development of a better future as the forecasted visions give an alternative to plan, design, shape, and cope with future.…

    • 1962 Words
    • 8 Pages
    Good Essays