PAMANTASAN NG Graduate School of Master in Business July 10, 2021
LUNGSOD NG MAYNILA Management Administration
Forecasting: Introduction and
Common Features
Dan Edward Nacion
Group Topics
Introduction to forecasting
Features common to all forecasts
Associative forecasting technique
Approaches to forecasting
Introduction to forecasting Features common to all forecasts
Lesson Overview
A Definition of forecasting
B Importance of forecasting
C Features common to all forecasts
D Elements of a good forecast
E Example of forecasting within the organization
A Definition of forecasting
Forecast
- a statement about the future value of a
variable of interest
- a process of estimating the future value using the
past and present data and events
A Definition of forecasting The term “forecasting” might vary within the
company or organization:
Plant Manager
Personnel
Requirements
Plant Capacity
Requirements
Capital
Expenditures
HR Manager
Financial
Professional
A Definition of forecasting
Key Question: “What will the customer demand at
some future point in time?”
A Definition of forecasting
Expected level of demand
Important aspects of forecasting:
Degree of accuracy that can be
assigned to a forecast
“What will the customer demand at
Types of forecast by time:
some future point in time?”
• Short range (days – weeks - months)
➢ job scheduling, work assignments
• Medium range (1 – 2 years)
➢ sales, production
• Long range ( > 2 years )
➢ change in location
A Definition of forecasting
EXAMPLE:
Forecast future child population
Future Child
Population
Child Birth
EXAMPLE:
A Definition of forecasting Forecast future child population
Immigration
and
Emigration
Economic Prosperity Child Birth Future Child Population
Housing Development Housing Stock
A Definition of forecasting
FORECAST vs PREDICTION
Refers to a calculation or an An actual act of indicating that
estimation which uses data from something will happen in the
previous events, combined with future with or without prior
recent trends to come up a future information
event outcome.
ACCURACY More Less
BIAS Objective Subjective
QUANTIFICATION Can be quantified Can’t be quantified
All forecasts are predictions, but not all predictions are forecasts.
Introduction to forecasting Features common to all forecasts
Lesson Overview
A Definition of forecasting
B Importance of forecasting
C Features common to all forecasts
D Elements of a good forecast
E Example of forecasting within the organization
B Importance of forecasting
B Importance of forecasting
Inventory or Material Management
Predicting demand or orders of products may
lead to achieving an optimum level of inventories
by reducing the shortage or surplus inventory of
both raw material and finished goods.
B Importance of forecasting
Improve Employee Relations
Forecasting promotes active participation and
coordination of staff members in the process of
forecasting
B Importance of forecasting
Better Utilization of Available Resources
Using forecasting, organizations ensure optimum utilization of their available resources such as
capital, manpower, material, and other resources by identifying the weak areas and giving required
information related to the future.
B Importance of forecasting
Improve Customer Satisfaction
Better customer service leads to customer satisfaction
which demands offering customers the right products/
services in the right quantity and at the right time. Using
forecasting to enhance, refine, and streamline different
functions of an organization such as operations, logistics,
and production.
B Importance of forecasting
Forecasting as a Decision-making Tool
It helps in improving efficiency. Different demand
forecasting techniques such as qualitative and quantitative are
used by organizations to estimate the demand for their
products in the future and decisions are made accordingly.
B Importance of forecasting Executive
➢ Company goals and engagement to
Finance other companies
➢ Equipment, replacement needs, timing and
amount of funding/borrowing needs
Accounting
➢ New product/process cost estimates,
profit projections, cash management. Marketing
➢ Pricing and promotion, e-business
strategies, global competition
strategies
MIS
➢ New/revised information systems,
Internet services.
Operations
Human Resource
➢ Schedules, capacity planning, work assignments
and workloads, inventory planning, make-or-buy ➢ Hiring activities, including recruitment,
decisions, outsourcing, project management. interviewing, and training; layoff planning,
including outplacement counseling
Introduction to forecasting Features common to all forecasts
Lesson Overview
A Definition of forecasting
B Importance of forecasting
C Features common to all forecasts
D Elements of a good forecast
E Example of forecasting within the organization
C Features common to all forecasts
• Forecasting techniques generally assume that the same underlying causal
system that existed in the past will continue to exist in the future.
• Forecasts are not perfect; actual results usually differ from predicted values; the
presence of randomness precludes a perfect forecast.
• Forecasts for groups of items tend to be more accurate than forecasts
for individual items because forecasting errors among items in a group
usually have a canceling effect.
• Forecast accuracy decreases as the time period
covered by the forecast — the time horizon —
increases.
Introduction to forecasting Features common to all forecasts
Lesson Overview
A Definition of forecasting
B Importance of forecasting
C Features common to all forecasts
D Elements of a good forecast
E Example of forecasting within the organization
D Elements of a good forecast
SIMPLE TO
UNDERSTAND
RELIABLE
ACCURATE
TIMELY
COST-EFFECTIVE
IN WRITING EXPRESSED IN
MEANINGFUL UNITS
Introduction to forecasting Features common to all forecasts
Lesson Overview
A Definition of forecasting
B Importance of forecasting
C Features common to all forecasts
D Elements of a good forecast
E Example of forecasting within the organization
E Example of forecasting within the organization
• Multi-national Business Process Outsourcing company
across 14 countries around the globe like USA, Canada,
Philippines, Japan, India, China, and other countries in
Europe and Latin America
E Example of forecasting within the organization
Healthcare Communications
Media & Entertainment
Financial Services
Retail & Consumer Goods
Transportation & Logistics
Technology
Travel & Hospitality
Energy & Utility
Public Sector
E Example of forecasting within the organization
Retail & Consumer Goods OPERATIONS
MANAGERS
PROJECT
MANAGERS
AGENTS
SUPPORT
GROUP
CLIENTS
(LINE OF BUSINESS)
E Example of forecasting within the organization Retail & Consumer Goods
Budget planning
analyzing the costs and expenses
Schedule planning
make sure deadlines are met
Staff management
recruitment and onboarding
Skills development
provide skill and career development
PROJECT MANAGERS VS OPERATIONS MANAGERS
E Example of forecasting within the organization
CASE: STEPS IN THE FORECASTING PROCESS
Forecast the number of
STEP 1: Determine the purpose of the forecast
resources needed for the
migration of 30 clients to the • Number of resources needed for the project
(Programmer, Testers, Business Analysts, Support, Contractual)
new system
STEP 2: Establish a time horizon
• Medium-range (Aug 2021 to July 2022)
E Example of forecasting within the organization
CASE:
STEP 3: Obtain, clean, and analyze appropriate data
Forecast the number of
• No. of clients
resources needed for the
• Projected new projects – new setup per client
migration of 30 clients to the
• Production issues
new system
• Planned leaves
STEP 4: Select a forecasting technique
• Naive Method
STEP 5: Make the forecast
STEP 6: Monitor the forecast errors
• Project timeline, metrics and milestones
E Example of forecasting within the organization
STEPS IN THE FORECASTING PROCESS
STEP 1: Determine the purpose of the forecast
STEP 2: Establish a time horizon
STEP 3: Obtain, clean, and analyze appropriate data
STEP 4: Select a forecasting technique
STEP 5: Make the forecast
STEP 6: Monitor the forecast errors
Introduction to forecasting Features common to all forecasts
Lesson Overview
A Definition of forecasting
B Importance of forecasting
C Features common to all forecasts
D Elements of a good forecast
E Example of forecasting within the organization
PAMANTASAN NG Graduate School of Master in Business
LUNGSOD NG MAYNILA July 10, 2021
Management Administration
END OF PRESENTATION
THANK YOU
Forecasting: Introduction and Common Features Dan Edward Nacion
