PRINCIPLES OF

MANAGEMENT
TOPIC: FORECASTING NEEDS AND TECHNIQUES.

BY: PRANAV PILLAI,VINAMARA PAUL, MUIZZ

 By definition, forecasting is the process of assessing the
future normally using calculations and projections that take
account of the past performance, current trends, and
anticipated changes in the foreseeable period ahead.
Forecasting is the process of making predictions of the
future based on past and present data and most commonly
FORECASTING by analysis of trends.

A commonplace example might be estimation of some

variable of interest at some specified future date.

Prediction is a similar, but more general term.

FEATURES OF FORECASTING

• Forecasting relates to future events.

• Forecasting is needed for planning process because it devises the future course of action.
• It defines the probability of happening of future events. Therefore, the happening of future
events can be precise only to a certain extent.
• Forecasting is made by analysing the past and present factors which are relevant for the
functioning of an organisation.
• The analysis of various factors may require the use of statistical and mathematical tools
and techniques.
ROLE OF FORECASTING:

• Since planning involves the future, no usable plan can be made unless the manager is able
to take all possible future events into account.
• This explains why forecasting is a critical element in the planning process.
• In fact, every decision in the organisation is based on some sort of forecasting.
PECULIARITIES, CHARACTERISTICS OR FEATURES
OF FORECASTING.
• Forecasting is concerned with future events.
• It shows the probability of happening of future events.
• It analysis past and present data.
• It uses statistical tools and techniques.
• It uses personnel observations.
IMPORTANCE OF FORECASTING

• Forecasting provides the relevant and reliable information about the past and present
events and the likely future events. This is necessary for sound planning.
• It gives confidence to the managers for making important decisions.
• It is the basis for making planning premises.
• It keeps the managers active and alert to face the challenges of future events and the
changes in the environment.
FORECAST
HORIZON
AREAS OF FORECASTING
STEPS FOR FORECASTING

Step 1 Step 2 Step 3 Step 4 Step 5 Step 6

Analyzing and Developing Collecting and Estimating the Comparing Follow up
understanding sound analyzing the future events. the results. action.
the problem. foundation. data.
FORECASTING METHODS AND TECHNIQUES

• Delphi Technique:
• The RAND Corp. developed this in the 1960s
• A group of experts responds to a series of questionnaires.
• The experts are kept apart and are unaware of each other.
• The results of the First questionnaire are compiled, and a second questionnaire based on the
results of the first one is presented to the experts, who are asked to reavluate their responses
to the first one.
• The questioning, compiling and requisitioning continue till the reseachers have a narrow range
of options.
FORECASTING METHODS AND TECHNIQUES

• Scenario Writing:
• The forecaster generates different outcomes based on different criteria.
• The Decision maker then decides on the most likely outcome from the numerious scenerios
presented.
• Scenario writing typically yields Best, Worst and Middle options.
FORECASTING METHODS AND TECHNIQUES

• Brain Storming Technique:

• It is used to forecast demand, especially for new products.
• In this method, many experts sit together and each expert gives his own idea (forecast) and
reason for it.
• One idea leads to many more ideas.
• The group of experts will develop many more ideas than just one person, Based on these
ideas demand can be forecasted.
 • Other Methods of forecasting:
• Time Series Forecasting.
FORECASTING • Goal Oriented Forecasting.
METHODS AND • Graphic Charting Technique.

TECHNIQUES • Matrix Technique.

• Nominal Group Technique.
• Simple Average Technique.