Forecasting is a tool of planning

What is Forecasting?
Process of predicting a future
event based on historical data
Educated Guessing
Underlying basis of
all business decisions

Production
Inventory
Personnel
Facilities

Why do we need to forecast?

Virtually every business attempt is based on

forecasting. Not all of them are derived from
sophisticated methods. However, Best" educated
guesses about future are more valuable for
purpose of Planning than no forecasts and hence
no planning.

Importance of Forecasting in OM
Departments throughout the organization depend on
forecasts to formulate and execute their plans.
Finance needs forecasts to project cash flows and
capital requirements.
Human resources need forecasts to anticipate hiring
needs.
Production needs forecasts to plan production
levels, workforce, material requirements,
inventories, etc.

Types of Forecasts
Short-range forecast
Job scheduling, worker assignments

Medium-range forecast
Sales/production planning

Long-range forecast
New product planning

What is Planning?

Introduction
Where we are and Where we

want to go?

Five Phases of Planning

1.
2.
3.
4.
5.

Organize and delegate roles

Initiate information gathering
Analyze data, identify goals & objectives
Write the new strategic plan
Market and disseminate the plan

Importance of
Forecasting in Planning

Provide reliable information

Decision making
Keeps managers active and alert
Basis on the planning premises

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