Forecasting
Business forecasting is the process of studying historical performance for the purpose of using the information gained to project future business conditions so that decisions can be made today that will assist in the achievement of certain goals. Forecasting involves taking historical date and using it to project future data with a mathematical model. Forecasts are extensively used to support business decisions and direct the work of operations managers. In this paper I will introduce different types of forecasting techniques.
What is Forecasting
Forecasting is the art and science of predicting future events. Forecasting is a statement about the future. “Operations management is designed to support forecasted performances and events. Specifically, operations managers allocate personnel, time, and resources in order to meet the demands of forecasts. The most successful companies achieve their results by assuming just such a proactive vice reactive posture.” (Forecasting) While forecasting is widely used, it does not fit into one model; multiple methods and models exist.
Forecasting Future Time Horizons
According to Heizer & Render, a forecast is usually classified by the future time horizon that it covers. Time horizons fall into three different categories: short-range forecast, medium-range forecast, and long-range forecast. Short-range forecast is from three months to one year. It is used for planning purchasing, job assignments, job scheduling, workforce levels, and production levels. Medium-range forecast ranges from three months to three years. It is used for planning, budgeting and production planning, cash budgeting, and analysis of various operating plans. ...