1. What Is Forecasting?

Forecasting is a technique that uses historical data as inputs to make informed estimates that
are predictive in determining the direction of future trends. Businesses utilize forecasting to
determine how to allocate their budgets or plan for anticipated expenses for an upcoming
period of time. This is typically based on the projected demand for the goods and services
offered.
Forecast: A prediction, projection, or estimate of some future activity, event, or
occurrence.
2. Elements of a good forecasting
The forecast should be timely: A certain amount of time is going to be needed to respond to a
new forecast. Capacity can’t be expanded overnight, and in order to increase or reduce
production to meet the forecast you’re going to need enough time to reconfigure your
equipment and processes. Accordingly, try to leave enough time in your forecasting to cover any
potentially needed changes.
The forecast should be accurate: Sure, this sounds a little obvious, but any forecasting needs to
be as accurate and researched as possible. This will enable any user to plan for possible error,
and will provide a good basis for comparing alternative forecasts.
The forecast should be reliable: In a similar vein to being accurate, a forecast system needs to
produce the same results every time. Even an occasional error could cause big problems for
your overall forecast and projections, and could leave users with the uneasy feeling that their
system isn’t as reliable as it should be.
The forecast should be in the correct units: The forecast needs to be in a unit of measurement
that is the most meaningful to whoever will be using it. If the forecast is primarily financial,
measuring it in the cost of the items as opposed to the quantity of items produced will prove
more useful, while production planners need to know how many of each unit will be produced,
and so on and so forth.
The forecast should be simple to understand and use: Forecasts that are overly complicated
tend not to instill a lot of confidence in users. Make sure your forecasts are thorough enough to
cover everything that needs to be forecasted, but simple enough that new users can get
acclimated quickly.

Timely = the horizon must cover the time necessary to implement changes so that its results can
be used.
Accurate = the degree of accuracy should be stated, enabling users to plan for possible errors
and providing a basis for comparing alternative forecasts.
Reliable Methods = method/software should work consistently
Meaningful Units = choices of units should be dependent on user needs
Results In Writing = the forecasts users must all be on the same page, so all should be reading
from a written summary of forecast results (same interpretation)
Simple Techniques = the technique should be easy to use, and simple to understand. If the
technique is too sophisticated, users may not have faith in it.
Cost-Effective = the forecast's cost of implementation should be justified / outweighed by its
benefits.
 Timely, accurate, reliable, meaningful units, in writing, simple to understand and use, & cost-
effective
3. Why is forecasting important in making decisions?
Forecasting plays a major role in decision making because forecasts are useful in improving the
efficiency of the decision-making process. Businessmen use various qualitative and quantitative
demand forecasting techniques to predict future demand for products and accordingly take
business decisions. Qualitative techniques include expert opinion, survey and market
experiments, whereas quantitative techniques include time series analysis and barometric
method.

4.
Qualitative forecasting methods, often called judgmental methods, are methods in which the
forecast is made subjectively by the forecaster.

Quantitative forecasting methods, on the other hand, are based on mathematical modeling.
Because they are mathematical, these methods are consistent.

5.