Thursday 17 January 2019

Forecasting Process steps | Measures | Advantages & disadvantages

A Forecasting is the art and science of predicting what will happen in the future. Forecasting process steps are one of a very important function since almost all business decisions are taken based on forecasting what will happen in the future. Planning-planning business as product model and the number of units to be produced, which most market potential, how many employees must be hired, how much capital should be provided and how much raw material to be bought generally made based on Forecast or Forecasting as determined by management.

Forecasting bad business decisions that will produce the wrong and make the company is not ready to meet the demands of the future. So it would be very dangerous to the company itself. The consequences may include loss of customers or suffer heavy losses or even forcing the company in question out of his business. And of course, a Forecast or a good and accurate Forecasting can help companies in preparing all its resources to cope with all the demands in the future. So that it can benefit the company and won the competition his business.

The notion of forecasting 

The following are some definitions or understanding or understanding Forecasting according to the experts:

  • The notion of forecasting is the calculation which objectively and with the use of the data in the past. To specify something in the future.

  • Notion of forecasting is the process of estimation the magnitude or number of something in the future based on the data in the past who analyzed scientifically especially using statistical methods.

  • The notion of forecasting is a process to predict some future needs come in size requirements which include the quantity, quality, time and location required in order to meet the demand for goods or services.

  • Understanding Forecasting or Divination forecasting is an art and science to predict future events involving the retrieval of historical data and project it to the future with the model of systematic approach.

  • Understanding Forecasting is a basic input in the decision-making process in delivering operations management information about the request in the future with the aim to specify how the capacity or the necessary supplies to make staffing, the budget should be prepared, ordering goods from the supplier and partner of supply chain is needed in making a planning.

  • The notion of forecasting is a process to predict some future needs come in size requirements which include the quantity, timing, and location of the needs in the order to meet the demand for goods or services.

From the definitions above, the experts we can draw the conclusion that Forecasting is the process of analyzing and understanding information at this time and the past to figure out the pattern of the future through scientific and systematic approach.

Forecasting Process steps

The following are the steps required in the process of forecasting.

  1. Determine the purpose of forecasting

    Keep in mind that, Forecasting needed to plan for the future, therefore, we have to consider and decide on the forecasting of what is actually required by us. It might sound simple, but of mistakes or decide what we want will yield different results. So that the accuracy of forecasting will be in doubt. In this stage, we also need to specify every detail of the forecasting. An example of the type of product, the require unit (how the box or unit) and time period (e.g. weekly, monthly or yearly).

  1. Evaluate and Analyze the appropriate data

    This step involves the identification of what data is needed and what is available. Identifying these data will have an impact on the selection method of forecasting. For example, if we want to predict the number of sales on a new product, maybe we don't have historical data sales thus limiting us to use forecasting methods that are quantitative.

  1. Select and test Method of forecasting

    After the data are evaluated, the next step is to choose and specify the model or the proper forecasting methods. Generally, the method chosen is Forecasting methods have been considering factors such as the cost and ease of use. In addition, one of the most important factors are factors of accuracy of forecasting. The most common way is by finding the two or three best methods and then test them on historical data to see where forecasting methods or models are the most accurate.

  1. Yield Forecasting

    After determining method or model forecast/forecast where we will use, furthermore is produce a self-fulfilling prophecy that we need.

  1. Monitor the Accuracy of forecasting

    Forecasting or Forecasting is an ongoing process. After making a prediction, we should take note of what actually happens. Then use the information to monitor our forecasting accuracy. Keep in mind that the best forecasting method in the past are not necessarily able to give you the best results for the future. Therefore, we must always be prepare to revise our forecasting methods in line with the changes in our data.

Advantages and disadvantages of forecasting

Although Forecasting or so needed in operations management and production Forecasting, but also has drawbacks. The following are advantages and disadvantages in Forecasting or Forecasting.

Advantages of forecasting

An organization uses a variety of methods or techniques of forecasting to assess "possible" results. It will be obtain by your organization or company. The method used depends on the data available and the type of industry. That is operate by the company. The main advantages of forecasting or forecasting this is provides valuable information. That can be use by the company to take a decision on the future of the company in question.

Disadvantages of Forecasting

It can be said that it is almost impossible to predict the future accurately 100%. This is due to the nature of forecasting itself. Scenario or business conditions are subject to change and vary depending on the interpretation of the data. The obtain and also changes and factors unforeseen more on the business environment. Therefore, an organization or company can not 100% dependent on certain forecasting methods. However, the organization can effectively use forecasting with the help of other analysis tools. To get the best information that "probably" will happen in the future. Make decisions on the results of low accuracy rate forecast will result in destruction on corporate finance. In other words, companies are encouraged to integrate forecasting with other business analysis tool.

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