What is Forecasting? - Type of Forecasting

Forecasting:

• Predicting about future is forecasting.
• Forecasting is one of the very important aspect for Plant manager to inspect about the increase or decrease in future product sale, either to hire more employees in company if sale increased or to threaten the existing employees for work.

• Forecasting is done for three different periods:
1. Short range; less than one year mostly for three months. (Low level)
• Everyday / week by week / quarterly sales forecasting.
2. Mid Range; Forecasting for one to three years. (Mid level)
• product cost planning one or more then.
3. Long Range; For more then three years. (Top level)
•What the new Facilities would be required?

Types of Forecasting:

1. Economic:

• About planning indicator.
• Regarding inflation, interest rate and GDP rate etc... that how much it is going to increase or decrease in future years.

2. Technological:

• About advancement in technology or products in future like assuming that what changes are required in future products.
e.g:
Mobile phone
 

3. Demand: 

• About sales of the company products that how much sale called be increased or decreased.
Forecasting and Product Life Cycle (PLC):
• Forecasting is related to the PLC, PLC had impact on it.
• Their are four stages of PLC ; initial, growth, maturity and decline.
• According to the stage of product in PLC; forecasting made about product.
Impact Of Forecasting:
• Impact of Forecasting is mainly on;

a. HRM

• Forecasting helps in identifying the requirement of human resource in company either to hire new employees according to the forecasting requirement of sale or to terminate existing employees.
• If forecasting is about technological advancement in product so it is HRM responsibility to see that if their is training of employees needed or not??...
b. Supply Chain Management:
• A complete process of making product from start to end.
• What changes are made in product According to the forecasted product is responsibility of SCM.
c. Capacity:
• Production capacity is companies; that how much units are producing and how much can produced incase of increase in sale if new machines were purchased of new technology to manage time capacity in shift's to adopt two shifts of 10–12 hours or three shifts of 8 hours to meet the forecasted sales.

Approaches of Forecasting:

1. Qualitative:

• Detailed information
• Expertised required for qualitative forecasting.
• It involves subjectivity
• Composed of different opinion.
• It is documented

a. Jury of Executive Decision:

• This approach of qualitative forecasting is depends upon top level institution, expertise, experience, skills, qualification, emotions, prediction and knowledge.

b. Delphi Method:

• This approach is consisting upon three groups of different expertise.
• First group collect information, second report information, distributes need of information among all and third group forecast desicion.
• It is composed like that:
sort—> report—> decision
e.g: On 5th October, 2005 ; earthquake has came so Tents demand was increased question raises among companies that what facilities should be developed now and some as in planning it should be considered that due to an artificial demand what should we do? production increased, hired Employees, temporary wage rate, rent out production capacity etc.

c. Sale Force Composite:

• Forecasting was done by sales force (scales person) in market; they tell about future sale rate.
d. Consumer Survey:
• Get an opinion about product from customer's and usuage of product, then on the behalf of information taken by customer, forecast about product.

2. Quantitative: (involves statistical and mathematical tools)

• Times series Models
Naive
Moving average
Exponential smoothing
Trend projection
• Associative Models
linear regression