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    Chapter 1 Forecasting Perspective

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    Nikita Nath
    This document provides an overview of forecasting techniques. It begins with explaining why forecasting is important, such as reducing uncertainty to allow for better decision making and assuming the future is an extension of the past. The document then describes the main quantitative and qualitative forecasting techniques, including time series analysis, explanatory/causal models, and Delphi techniques. It also outlines the basic steps in forecasting, such as problem definition, data gathering, preliminary analysis, choosing and fitting a model, and evaluating the model. Finally, it provides examples of different time series datasets and questions about appropriate forecasting methods.

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    Chapter 1 Forecasting Perspective

    Uploaded by

    Nikita Nath
    232 views10 pages
    This document provides an overview of forecasting techniques. It begins with explaining why forecasting is important, such as reducing uncertainty to allow for better decision making and assuming the future is an extension of the past. The document then describes the main quantitative and qualitative forecasting techniques, including time series analysis, explanatory/causal models, and Delphi techniques. It also outlines the basic steps in forecasting, such as problem definition, data gathering, preliminary analysis, choosing and fitting a model, and evaluating the model. Finally, it provides examples of different time series datasets and questions about appropriate forecasting methods.

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    This document provides an overview of forecasting techniques. It begins with explaining why forecasting is important, such as reducing uncertainty to allow for better decision making and assuming the future is an extension of the past. The document then describes the main quantitative and qualitative forecasting techniques, including time series analysis, explanatory/causal models, and Delphi techniques. It also outlines the basic steps in forecasting, such as problem definition, data gathering, preliminary analysis, choosing and fitting a model, and evaluating the model. Finally, it provides examples of different time series datasets and questions about appropriate forecasting methods.

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    © All Rights Reserved
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    Download as pptx, pdf, or txt
    232 views10 pages

    Chapter 1 Forecasting Perspective

    Uploaded by

    Nikita Nath
    This document provides an overview of forecasting techniques. It begins with explaining why forecasting is important, such as reducing uncertainty to allow for better decision making and assuming the future is an extension of the past. The document then describes the main quantitative and qualitative forecasting techniques, including time series analysis, explanatory/causal models, and Delphi techniques. It also outlines the basic steps in forecasting, such as problem definition, data gathering, preliminary analysis, choosing and fitting a model, and evaluating the model. Finally, it provides examples of different time series datasets and questions about appropriate forecasting methods.

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    of 10

    Chapter 1

    Forecasting
    Perspective

    Based on Material and Data from Forecasting


    Methods and Applications by Makridakis et al, 3 rd
    Edition, Wiley

    Dr. Sunil D. Lakdawala

    Contents

    Why Forecasting?
    Overview of Forecasting Techniques
    Basic Steps in Forecasting

    Why Forecasting?

    Future is uncertain
    Whatever will happen, will happen
    Time lag between awareness of an impending event and
    occurrence of an event
    If Time lag is long, planning can be useful
    Reduce Uncertainty to allow for better decision by
    management
    Assumption: FUTURE is EXTENSION of PAST or
    difference can be explained by variable

    Why Forecasting? (Cont)

    Typical Major Applications


    Scheduling Resources
    Acquiring Resources
    Determining Resource Requirements
    Primary Rules of Forecasting
    Technically correct and produce forecast accurate
    enough for the purpose
    Justifiable on cost-benefit basis
    Sellable to Management
    Usable with ease by Management
    Forecasting is the art and science of predicting the
    future.
    4

    Overview of Forecasting
    Techniques

    Overview of Forecasting
    Techniques(Cont)

    Quantitative
    Time Series
    Explanatory / Causal
    Apply when
    Information about past is available
    Information can be quantified in form of numerical
    data
    Some aspects of past pattern will continue in future
    Qualitative (e.g. Delphi)
    Unpredictable (Not everything should be forecasted)
    6

    Overview of Forecasting
    Techniques(Cont)

    Time Series vs. Explanatory


    Time series forecasting treats system as a black box
    Time series is used when
    system is not understood, or very difficult to explain
    in terms of relationship with other variables
    Main concern is to predict (not to explain why)

    Basic Steps in Forecasting

    Problem Definition and identifying output to be


    forecasted
    Gathering Information and Input
    Preliminary (Exploratory) Analysis
    Descriptive Statistics
    Visualization
    Decomposition (For Time Series)
    Trend, Seasonality, Cycle (For Time Series)
    Choosing and Fitting Model
    Using and Evaluating Model
    8

    Examples
    Fig 1-2a Australian Monthly Electricity Consumption
    Increasing Trend, Increasing Variation, Strong Seasonal
    Pattern, Slow change in shape
    Easy to forecast using Time Series
    Early data useful?
    Application?
    Fig 1-2b US Treasury Bill Contracts
    Downward Trend
    Is Time Series adequate for forecasting?
    Will it continue?
    Time horizon for forecasting?
    9

    Examples (Cont)
    Fig 1-2c Sales of a Product
    Huge variations
    Is Time Series adequate for forecasting?
    If not, what do we need to forecast?
    Fig 1-2d Australian Clay Brick Production
    Seasonal and Very volatile
    Is Time Series adequate for forecasting?

    10

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