What is Forecasting? | Process & Benefits of Forecasting

Summary

This video introduces forecasting, a crucial technique for predicting future trends through the analysis of past and present data. It outlines two primary methods: qualitative, which relies on expert judgment, and quantitative, which uses mathematical processes for objective results. The forecasting process involves developing a basis for investigation, estimating future operations, regulating forecasts by comparing past and current outcomes, and reviewing the overall process. The benefits of forecasting include aiding decision-making, ensuring product availability, staying updated with market trends, learning from past experiences, and facilitating financing. This essential tool empowers businesses to navigate uncertainties effectively.

Takeaways

• 📊 Takeaway 1: Forecasting is a technique for predicting future trends by analyzing past and present data.
• 💼 Takeaway 2: Businesses use forecasting to allocate resources and plan for anticipated expenses.
• 🔍 Takeaway 3: Forecasting helps companies cope with uncertainty by examining historical trends.
• ⚖️ Takeaway 4: There are two primary methods of forecasting: qualitative and quantitative.
• 🗣️ Takeaway 5: Qualitative forecasting relies on personal judgments and expert opinions, making it subjective.
• 📈 Takeaway 6: Quantitative forecasting uses mathematical processes to provide objective and consistent results.
• 🔄 Takeaway 7: The forecasting process involves developing a basis, estimating future operations, regulating forecasts, and reviewing the process.
• 📅 Takeaway 8: Regular forecasting enables businesses to stay updated on changing market trends.
• 📉 Takeaway 9: Analyzing past data helps businesses learn from previous successes and failures.
• 🏦 Takeaway 10: Accurate forecasting is crucial for securing financing, as it provides banks with necessary sales and profit projections.

Q & A

What is forecasting?

Forecasting is a technique for making predictions about the direction of future trends based on the analysis of past and present data.

Why do businesses use forecasting?

Businesses use forecasting to determine how to allocate their plans for anticipated expenses over a forthcoming period, aiding in decision-making amid future uncertainties.

What are the two basic methods of forecasting?

The two basic methods of forecasting are qualitative and quantitative methods.

What is the qualitative method of forecasting?

The qualitative method, also known as the judgmental method, offers subjective results based on personal judgments from experts, making it potentially biased.

How does the quantitative method differ from the qualitative method?

The quantitative method is a mathematical process that is consistent and objective, utilizing large amounts of data and figures rather than relying on personal opinions.

What is the first step in the forecasting process?

The first step is to develop the basis of forecasting by investigating the company's current condition and market position.

What does the second step of forecasting involve?

The second step involves estimating the future operations of the business based on the investigation carried out in the first step.

Why is it important to regulate the forecast?

Regulating the forecast is important to compare past forecasts with actual results, analyze discrepancies, and understand the reasons for deviations.

What are some benefits of forecasting?

Benefits include predicting the future, improving customer satisfaction, keeping the company up to date with market trends, learning from past experiences, and aiding in receiving financing.

How does forecasting help in customer satisfaction?

By predicting demand accurately, companies can ensure their products are available, increasing the likelihood of meeting orders and delivering on time.