SEZER KOÇ2008503046

DEU İndustrial Engineering

1. Meaning of Forecasting2. Factors involved in Demand

Forecasting3. Forecasting Time Horizons4. Types of Forecasts5. Elements of a good Forecast6. Forecasting of a New Product7. Steps in the Forecasting Process

FORECASTING

Forecasting means: The first step in planning. Estimating the future demand for products

and services and the resources necessary to produce these output.

An art and science of predicting future events.

Meaning of Forecasting

1. How far ahead ?a) Long-term: e.g. petroleum, paper, shipping, Tactical

decisions. Within the limits of resources already available.

b) Short-term : e.g. clothes, Strategic decisions, extending or reducing the limits of resources.

2. Undertaken at three levels;a) Macro-levelb) Industry level e.g. Trade Associationsc) Firm level

3. Should the forecast be general or specific (Product-Wise) ?

Factors involved in Demand Forecasting

According to the time period forecasting can be of three types:

1. Short-range forecast : Its period mean a few weeks or a few month. Its purpose isa) Estimate inventory requirement. b) Providing transport facilities.c) Decide work load for man and machine. d) Deciding the working capital required.e) Deciding the required overtime.f) Determining appropriate price policy.

2. Intermediate-range forecasting : Its period may be a few weeks or upto one year. Its purpose isa) Determine dividend financing.b) Determine schedule of operation.c) Deciding the budgeting control over expenses.

3. Long-range forecasting : Its period may be a few year. Its purpose is a) Plans for future.b) Man power requirement.

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c) Deciding the expected capital required to meet the expenses.

d) Plan for material required.e) Plan for research and development.

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1. Technological forecasts : Concerned with rates of technological progress.

2. Economic forecasts : Statement of expected future business conditions.

3. Demand forecasts : Projections of demand for a company’s products or services throughout some future period.

Types of forecast

The forecast should be timely. The forecast should be accurate. The forecast should be reliable. The forecast should be expressed in

meaningful units such as rupees, units of products, machines and skills needed.

The forecasting techniques should be simple to understand and use (comfortable for users).

Elements of a good forecast

It is very difficult to forecast the demand of a new product as compared to the existing one. There are a number of method used some of them are:1. Direct market survey :

In this method the potential customers are contacted personaly and the information regarding the product is being extracted. This will be done with the help of questionary collected is then anyalsised to make the forecaste. This is a time consuming and costly method.

2. Indirect market survey : In this method the required information is collected from the product representative like Wholeseller, Distributor or Retailer. The required data is being collected and then analysis to get the required information.

Forecasting of New Product

3. Comparing with related product : In this method the sells data or the demand data for the existing product is being collected which act as a guidline for making the forecast for our new product.

4. Limited market trial : In this method a sample is manufacture, produce to test the market and to acquire the customer view. After getting the customer feedback the forecast for the new product can be made.

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1. Determine the purpose of the forecast : What are the objectives of forecasting? When the forecasts are needed?

2. Select the items for which forecasts are needed : Determine whether the forecast is needed for single product or for a group of products.

3. Determine the Time Horizon for the forecast : Is it short term, medium-term or long-term? The forecast must indicate the time horizon and whether to develop forecasts weekly, monthly, quarterly or yearly.

Steps in the forecasting process

4. Select the forecasting model : Determine whether to use statistical models(quantitative) including moving averages, exponential smoothing and regression analysis or qualitative techniques like market research.

5. Gathering information to be used into the forecast : The data may be collected by two sources : a) Primary sourcesb) Secondary sources

6. Making the forecast : Using the selected method.7. Monitor the forecast : To determine whether it is

performing satisfactorily.

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Question ???

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