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Steps in The Forecasting Process

The forecasting process involves 6 steps: 1) determining the purpose and time horizon of the forecast, 2) selecting a qualitative or quantitative technique, 3) gathering and analyzing appropriate data, 4) preparing the forecast, 5) monitoring the forecast, and 6) revising the forecast if needed. A good forecast is timely, reliable, accurate, expressed in meaningful units, documented in writing, and simple to understand.

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Umer Farooq
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133 views2 pages

Steps in The Forecasting Process

The forecasting process involves 6 steps: 1) determining the purpose and time horizon of the forecast, 2) selecting a qualitative or quantitative technique, 3) gathering and analyzing appropriate data, 4) preparing the forecast, 5) monitoring the forecast, and 6) revising the forecast if needed. A good forecast is timely, reliable, accurate, expressed in meaningful units, documented in writing, and simple to understand.

Uploaded by

Umer Farooq
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Steps in the Forecasting Process

•Determine the purpose of the forecast meaning what is the purpose and when will it be
required. This will provide the level of detail for resources required man, machine, time and
capital.

•Establish a time horizon. We already know that as time increases the accuracy of the Forecast
decreases

•Select a forecasting technique whether qualitative or quantitative

•Gather and analyze the appropriate data. It goes without saying that before a forecast can be
delivered data is required. The closer the real life data more realistic would be the forecast. This
may be the time when you would like to identify the important assumptions and suppositions.

•Prepare the forecast.

•Monitor the forecast. A forecast has to be closely monitored to determine whether it is


fulfilling its basic purpose. This helps in re-examining the method, assumptions and validity of
the data and preparing a revised forecast.

Requirements of a Good Forecast

Timely. The forecast should be timely. Indicating that forecasting horizon should provide enough
time to implement possible changes. Capacity cannot be expanded instantly it requires some time
to plan, coordinate and increase the required resources.

•Reliable. Forecasts should be reliable meaning that it should work consistently. A forecast that
is partially correct will succeed at some time and sometime fail making the end users question
the purpose and intent of forecasting.

•Accuracy. Forecasts should be accurate. In fact it should carry the degree of accuracy, so the
users are aware of the limitations of the forecast. This will also help the end users to plan for
possible errors and provide a basis for comparing the forecast with other alternative forecasts.
•Meaningful Forecast should be expressed in meaningful units. Financial Planners will use
Rupees to show how much capital would be required; Mechanical Project Schedulers would
require Forecasts to carry the type of machines and crafts of technicians required.

•Written/Documented. The forecasts should be presented in writing. A documented forecast


always provides a chance to measure the variance between estimate and actual result at a later
stage.

•Simple to understand and use meaning that Forecasts should not be dependant upon usage of
sophisticated computer techniques or task specific highly qualified technical personnel. A failure
or limitation on the part of this can lead to an incorrect decision and less acceptance amongst end
users

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