Forecasting is one important stage for scheduling and planning future activities. According to Principle of Business Forecasting (Ord, Fildes and Kourentzes, 2017), Forecast is an expected outcome at future time or for another situation with the purpose of providing information for planning process.
Reasons of conducting Forecasting could be explored from the goal of conducting the forecasting, the forecast horizon (the forecast depth and detail), the available information, the value of forecasting exercise, the analysis of forecasting method, and the necessity of evaluating forecasts.
However, it is also crucial to determine the details and depth of the forecasting (forecasting horizon) based on the need of forecasting and the available information for forecasting. Most companies require forecasting to plan their operations, allocate budgets and observe how their marketing strategies affect the demands, revenue and costs.
The appropriate forecasting approaches are dependent on the data and resources’ availability. Qualitative measures, such as judgmental forecasting, are applied if the data is insufficient and/or irrelevant to the forecasts.
On the other hand, if the data are sufficient enough and show a strong indication of consistency in the data pattern, then quantitative measurement becomes the apparent choice. Every quantitative approach owns distinct properties and procedures that susceptible to the forecasting purpose.
According to the Principle of Business Forecasting (Ord, Fildes, and Kourentzes, 2017), forecasting requires seven main steps:
Define the forecasting and planning problem, forecast horizon, and the value of better forecasts.
Decide a number of resources for generating the forecasts.
Collect relevant information from surveys, historical data, information from third-party companies, or any other possible sources.
Perform initial analysis of the data.
Choose an appropriate forecasting method
Develop the forecasts
Compare the forecasts with actual data and adjust the forecasting method accordingly.
These seven steps should be considered as one integrated process to produce desired results from the forecasting methods. Moreover, forecast performance should be regularly evaluated to maintain its performance long term.
Comments