Eight Steps to Forecasting
• Determine the use of the forecast
□ What objective are we trying to obtain?
• Select the items to be forecast
• Determine the time horizon of the forecast
□ Short time horizon – 1 to 30 days
□ Medium time horizon – 1 to 12 months
□ Long time horizon – more than 1 year
• Select the forecasting model(s)
Description Qualitative Approach Quantitative Approach  Applicability Used when situation is vague & little data exist Used when situation is stable & historical data   (e.g., new products and technologies) exist    (e.g. existing products, current technology)  Considerations Involves intuition and experience Involves mathematical techniques  Techniques Jury of executive opinion Time series models   Sales force composite Causal models   Delphi method    Consumer market survey  
Qualitative Forecasting Methods
Your company may wish to try any of the qualitative forecasting methods below if you do not have historical data on your products' sales. Qualitative Method Description  Jury of executive opinion The opinions of a small group of highlevel managers are pooled and together they...
...Forecasting is the process of making statements about events whose actual outcomes (typically) have not yet been observed. A commonplace example might be estimation of some variable of interest at some specified future date. Prediction is a similar, but more general term. Both might refer to formal statistical methods employing time series, crosssectional or longitudinal data, or alternatively to less formal judgemental methods. Usage can differ between areas of application: for example, in hydrology, the terms "forecast" and "forecasting" are sometimes reserved for estimates of values at certain specific future times, while the term "prediction" is used for more general estimates, such as the number of times floods will occur over a long period.
Risk and uncertainty are central to forecasting and prediction; it is generally considered good practice to indicate the degree of uncertainty attaching to forecasts. In any case, the data must be up to date in order for the forecast to be as accurate as possible.[1]
Although quantitative analysis can be very precise, it is not always appropriate. Some experts in the field of forecasting have advised against the use of mean square error to compare forecasting methods.[2]

Categories of forecasting methods
[edit]Qualitative vs. quantitative methods
Qualitative forecasting...
...FORECASTINGFORECASTING
The Role of the Manager
Planning
Organizing
Staffing
Leading
Controlling
Future ?
Data
Information
•
Shortrange
•
Mediumrange
•
Longrange
Features Common to All Forecasts
Forecasting techniques generally assume that
same underlying causal system that existed in
the past will continue to exist in the future.
Forecasts are rarely perfect.
Forecasts for groups of items tend to be more
accurate than forecasts for individual items.
Forecast accuracy decreases as the time
period covered by the forecast – the time
horizon increases
Marvin I. Norona
7 Steps in the Forecasting System
1)
2)
3)
4)
5)
6)
7)
Determine the use of the forecast.
Select the items to be forecasted.
Determine the time horizon of the forecast.
Select the forecasting model(s).
Gather the data needed to make the forecast.
Make the forecast.
Validate and implement the results (Monitor the
forecast and check if the forecast is performing in
a satisfactory manner).
Marvin I. Norona
Forecast
is a statement about the future
takes into account 2 kinds of information
Current factors or conditions
Past experience in similar situations
Forecast
Forecasting Time
Horizons
Marvin I. Norona
The art and science of predicting future events
Uses of Forecasts
Plan the System

longrange plans re new products...
...Forecasting
Why forecast?
Features Common to all Forecasts
• Conditions in the past will continue in the future
• Rarely perfect
• Forecasts for groups tend to be more accurate than forecasts for individuals
• Forecast accuracy declines as time horizon increases
Elements of a Good Forecast
• Timely
• Accurate
• Reliable (should work consistently)
• Forecast expressed in meaningful units
• Communicated in writing
• Simple to understand and useSteps in Forecasting Process
• Determine purpose of the forecast
• Establish a time horizon
• Select forecasting technique
• Gather and analyze the appropriate data
• Prepare the forecast
• Monitor the forecast
Types of Forecasts
• Qualitative
o Judgment and opinion
o Sales force
o Consumer surveys
o Delphi technique
• Quantitative
o Regression and Correlation (associative)
o Time series
Forecasts Based on Time Series Data
• What is Time Series?
• Components (behavior) of Time Series data
o Trend
o Cycle
o Seasonal
o Irregular
o Random variations
Naïve Methods
Naïve Forecast – uses a single previous value of a time series as the basis of a forecast.
Techniques for Averaging
• What is the purpose of averaging?
• Common Averaging Techniques
o Moving Averages
o Exponential smoothing
Moving Average
Exponential Smoothing
Techniques for Trend
Linear Trend Equation...
...Single Exponential Smoothing, Double Exponential Smoothing and ARESS method. These models are normally used to determine the shortterm forecasts (one month ahead) by analyzing the pattern such as monthly cocoa production. The performances of the models are validated by retaining a portion of the monthly observations as holdout samples. The selection of the most suitable model was indicated by the smallest value of mean square error (MSE) and mean absolute percentage error (MAPE). Based on the analysis, ARRES Method Model is the most suitable model for forecasting monthly cocoa production.
Keywords: Univariate Modelling Techniques; Forecast Model; Mean Square
Error, Mean Absolute Percentage Error
INTRODUCTION
We refer very frequently to future events in our daily lives, we look forward, we have the foresight to do something, we are able to foretell, we foresee an event and we say that something is forthcoming. Forecasting can be defined as the science and the art to predict a future event with some degree of accuracy. There are two types of forecast which are event forecast and time series forecast. The future occurrence of an outcome and the timing of such an occurrence are referring to an event forecast. The use of time series information in the prediction of the variable interest is the term of time series forecast. In a time series data set, the information is arranged according to time. Univariate Modelling Techniques are methods for...
... 
Capital 50000 50000 
Others 2000 3000 
2.Assume that in past years,a firm sold an average of 1000 units of a particular product line each year.On the average,200 units were sold in the spring,350 in the summer,300 in the fall and 150 in the winter.Compute the seasonal relatives for each season.If the expected demand in the subsequent year is 1100 units,use the seasonal relatives to forecast the seasonal demand.
3.A specific forecasting model was used to forecast the demand for a product.The forecast and the corresponding demand that subsequentlyy occurred are shown below.Use the MAD and tacking signal to evaluate the accuracy of the model.
Month Actual Forecast 
October 700 660 
November 760 840 
December 780...
...Businesses use forecasting to predict future, trends, patterns, and business with data to develop a forecast. This data is used to predict future sales. In forecasting we use testing and reasonableness to predict future events. Companies use this method to compare their sales with other companies. Forecasting has many benefits to include; what is the popular product customers are purchasing, and it enhances cash flow, and identifies patterns and trends inside a corporation. Using this method is popular and is quite achieving when done effectively.
Forecasting can result in decrease in product cost, increase company efficiency, and increase revenue. This method has to be administered at it entirely to reap the best benefits. Forecasting also requires a company to keep record of inventory, sales, and customer satisfaction. Many items are needed such as; financial statements, accounting records. In order to be successful you have to know what the customers want and why they want it.
Something’s that can affect the benefits of forecasting is weather, consumer income for example a recession, changes in population, and product changes. I have notice with some businesses, for example Chik Fila years ago changed their chicken. Something like this could cause changes in forecasting and profits.
EightSteps to Forecasting...
...
Forecasting
Cassandra Harris
HSM/260
5/3/2015
Cynthia Cucuzza
Forecasting
Exercise 9.1
The following data represent total personnel expenses for the Palmdale Human Service Agency for past four fiscal years:
20 X 1 = $5,250,000
20 X 2 = $5,500,000
20 X 3 = $6,000,000
20 X 4 = $6,750,000
Forecast personnel expenses for fiscal year 20X5 using moving averages weighted moving averages, exponential smoothing, and time series regression. For moving averages and weighted moving averages, use only the data for the past three fiscal years. For weighted moving averages, assign a value of 1 to the data for 20 X 2, a value of 2 to the data for 20 X 3, and a value of 3 to the data for 20 X 4. For exponential smoothing, assume that the last forecast for fiscal year 20 X 4 was $6,300,000. You decide on the alpha to be used for exponential smoothing. For time series regression, use the data for all four fiscal years. Which forecast will you use? Why?
Answer:
Fiscal Year Expenses
20 X 2 = $5,500,000
20 X 3 = $6,000,000
20 X 4 = $6,750,000
20 X 5 = $6,083,333
In order to get the moving average, I must add the last three years then divide by three, this will get me the forecasted expenses for fiscal year 20 X 5.
Weighted moving averages:
Fiscal Year Expenses Weight Score:
20 X 2 = $5,500,000 1 $5,500,000
20 X 3 = $6,000,000 2 $12,000,000
20 X 4 = $6,750,000 3 $20,250,000
20 X 5 = $6,291,667
In order to get the weighted moving average for fiscal...
...Each has inherent strengths and weaknesses. The forecaster must understand the strengths and shortcomings of each method and choose appropriately. One example of forecasting is the United States Marine Corps use of forecasting techniques, both qualitative and quantitative, to predict ammunition requirements.
Forecasting Defined
Forecasting is "A statement about the future" (Anonymous, 2005). Operations management is designed to support forecasted performances and events. Specifically, operations managers allocate personnel, time, and resources in order to meet the demands of forecasts. The most successful companies achieve their results by assuming just such a proactive vice reactive posture.
While forecasting is widely used, it does not fit into a standard one size fits all model. Multiple proven methods and models exist. In this paper we will examine, compare, and contrast the two most commonly used methods, qualitative and quantitative forecasting. Lastly, as a case study, we will examine how the United States Marine Corps forecasts its fiscal year ammunition requirements.
Qualitative Forecasting
Qualitative forecasts are the least scientific. They are based exclusively upon subjective data, such as opinions and estimates (Aquilano, Chase & Jacobs, 2005). Within the realm of qualitative forecasting are multiple techniques and measures....