|


 
‡ Although there are many different forecasting tools and
methods, they can be divided into four general
categories.
1. h



- involve the collection of expert
opinions
2.  



 - involve qualitative studies
of consumer behaviour
3. 


 ± mathematical methods in which
future projection is extrapolated from past performance
4.  


 ± are mathematical methods in which
forecasts are generated based on a variety of systems
variables
 1.0 JUDGEMENT METHODS

Judgement methods strive to assemble

the opinions of a variety of experts in a
systematic ways. e.g. salespeople or
dealers frequently have a good
understanding of the expected sales, since
they are close to the market.

A 




 can be assembled that
combines each persons estimate in a logical way.
 THE DELPHI METHOD
‡ A panel of experts is assembled in order to reach a
consensus, without gathering them in a single location.
The technique is designed to eliminate the danger of one
or a few strong willed individuals dominating the decision
making process.
‡ Each member of the group of experts is surveyed for his
or her opinion, typically in writing.
‡ The opinions are compiled and summarized.
‡ Each individual is given the opportunity to change his or
her opinion after seeing the summary.
‡ This process is repeated until consensus is achieved.
 Market Research Methods
‡  

and  
 
can be valuable
tools for developing forecasts, particularly of newly
introduced products.

‡ 
 
, focus groups of potential customers
are tested for their response to the product, and their
response is extrapolated to the entire market to estimate
the demand for product.

‡  
  involve gathering data from a variety of
potential customers, typically through interviews,
telephone based surveys, and written surveys.
 Time-Series Methods
‡ Time-series methods use a variety of past data to estimate the
future data.
‡ There are a number of techniques, each of which has advantages
and disadvantages.
‡ Below are some of the common time series methods:

‡ 


Each forecast is the average of some numbers of past data points.
The key is to select the number of points in the moving average so
that the effect of irregularities is minimized.
‡ 



 
Each forecast is a weighted average of the previous forecast and
the last demand point. Thus this method is similar to the moving
average, except that it is the weighted average of all past data
points, with more recent points receiving more weight.
 |orecast based on data with trend

‡ Methods for data with Trends

‡ The previous two methods assume that there is no trend
in the data.
‡ If there is a trend, methods such as Regression Analysis
and Holt¶s Method are more useful, as they specifically
account for the trend in the data.
‡ Regression analysis fits a straight line to data points,
while Holt¶s method combines the concept of exponential
smoothing with the ability to follow a linear trend in the
data.
‡ A number of techniques are also available for seasonal
changes in demand.
 Vausal Methods
‡ In time-series methods, forecasts are based
entirely on previous values of the data being
predicted.
‡ In contrast, Vausal methods generate forecasts
based on the data, other than the data being
predicted.
‡ In this, the forecast is a function of some other
pieces of data.
‡ e.g the forecast for the next quarter may be a
function of inflation, GNP, the unemployment
rate, the interest rates, weather or anything
besides the sales in previous quarters.
 Selecting the Appropriate |orecasting
Technique

‡ The quality of forecasts is frequently improved

by combining the various techniques.

‡ The results of combined forecasts are generally

better than individual forecasts.

‡ Experience and intuition of the person / persons

taking the final decision is important.