PRINCIPLES OF MANAGEMENT

LESSON 18: TYPES/ TECHNIQUES OF FORECASTING

Overview of The Lecture
In this lecture we will study the techniques used in forecasting. Since the prediction has to be done, so there must be some methods available, which will assist in doing it. give stability to figures. This helps in developing of product, territory, customer or salesmen breakdown. Forecasting is not yet a science and no fool proof method has yet been found. Independent and intuitive appraisal by intelligent and experienced brain is still valid. One cannot get too precise answers in an environment characterized by uncertainty. One should combine all the methods to get answers. If several different forecast indicators based on independent approaches and data, point to same result, forecaster can be assured of fairly reliable future

Objective is to Learn Forecasting Techniques Forecasting Techniques 1. Quantitative Time series analysis/ Exponential smoothing In this method, study of past data such as last year sale, last month sale or last year shipment trend are analyzed by the company based on the previous trend. Forecasting can be done by keeping in view the present factors 2. Derived Forecast or Regression method In this technique, forecast is derived from the data published by government agency or experts. For e.g. Computer Society India (CSI) disclosed that export of software has increased by 68%. This information will help the software development Company in forecasting the planning. 3. Casual Model If an underline cause for the variable can determine the forecast can be handled mathematically and produce quite accurate results. E.g. One might find that sales are the direct result of number of contacts by the sales executive and predict that from every 5 contact 1 sale will result. 4. Users expectations One way to find out about likely sales is to ask the customers themselves as to how much they need. Although it is not a commitment, it is good enough for a small company who can not use other methods because of its costs and customers are few. Also they should be easy to locate and be cooperative. 5. Sales force estimates Salesmen in the field are the best to know the market conditions as they operate there every minute. All the estimates in various areas are collected and with little adjustment averaged mostly the over and under errors cancel out each other. Although it appears to be perfect, there can be some drawbacks. Salesmen will have to be trained to be forecasters and to influence all the factors that affect the sales. Their participation should be encouraged provided that they are cooperative and unbiased. This will give them more confidence in themselves and they will take the responsibility of proving their worth. As the sample will be large it will

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