Forecasting is the technique that predicts the future uncertainties and helps us to cope up with the rapid changing environment. It is based on certain assumptions and uses the past, present, and makes future trend analysis to do the forecasting, it is the management tool that uses various techniques like Delphi technique, regression analysis, trend projection etc. Forecasting is needed in making the decision about the future uncertain events that cannot be controlled. Expertise are required to do the forecasting as it is based on assumptions that need to be accurate because decisions are based on these assumptions (Armstrong 2001).The scope of forecasting is very wide it is used in every field of lives; in the organization it is helpful in planning, making decision, controlling uncertain events. As the demands and preferences of the customers changes on regular intervals, rapid changes in the technologies, social or political changes, arises the need of forecasting. To sustain in the competitive market and become profitable company has to do forecasting.
Steps in ForecastingIdentify needs of forecasting: It is the first step includes the identification of the resources required and need of forecasting, it also analyzes how much accurate data is needed, organization has to identify the objectives and examine the internal and external changes in the environment that arise the need of forecasting (Shim & Siegel 2006).
Choose things to be forecasted: After analyzing the environment the next step is to identify all those critical areas that need to be forecasted and those plans which need to be revised. Due to the rapid changes in the environment organization have to revise its plans and do forecasting of those areas which is of uncertain in nature.
Time Horizon: This is the third step in forecasting in which the organization has to identify the time that will cover in forecasting, whether it is of short term, medium term, or long term in nature. It should be noted that higher the time in forecasting lower will be the accuracy, so it should be done accurately with limited time period (Ozcan 2009).
Gather Information: After selecting the areas or the problems that need to be forecasted the company has to gather the relevant information related to that and find out all those sources from where the they can take the required data, for this company has to do research and analyze the market scenario. They collect all the information related to the problem after that they scrutinize the collected data and take the necessary information (Makridakis, Wheelwright, & Hyndman 2008).
Selection of forecasting model: In this step the organization has to identify and select the techniques or models based on the complexity of the problem. They have to select according to the financial availability. Company must select those models that will fit to the investigation of the problem. There are various techniques available in the forecasting are like Delphi technique, Regression analysis, moving average, econometrics etc. through this forecasting can be done.
Implementation of forecasting: After selecting the forecasting areas and the parameters this step is to implement the forecasting technique, it is based on assumptions and this is done to make the decision. Through the implementation of forecasting company can predict about the future problems (Cravens 2009).
Monitoring: This is the last step of the forecasting process, in this company has to analyze whether the technique which has been adopted is providing the accurate data or not, if not then company has to take another forecasting technique that will generate more accurate results. They also have to monitor the techniques on regular intervals and do updating according to the changes in the environment that will lead to better decision making (Evans 2002).
We hope this post would be useful for students in helping them with their assignments and homework.
References
Armstrong, J.S. (2001) Principles of forecasting. New York: Springer.
Shim, J.K., & Seigel, J.G. (2006) Handbook of Financial Analysis, Forecasting and Modeling. 3rd ed. Chicago: CCH.
Ozcan, Y.A. (2009) Quantitative Methods in Health Care Management: Techniques and Applications. 2nd ed. San Francisco: John Wiley and Sons.
Makridakis, S., Wheelwright, S.C., & Hyndman, J. (2008) Forecasting Methods and Applications. 3rd ed. New York: John Wiley and Sons.
Cravens. (2009) Strategic Marketing. 8th ed. New York: Tata McGraw-Hill.
Evans, M.K. (2002) Practical Business Forecasting. USA: Wiley-Blackwell.