forecasting techniques pdf

The rst two types of scale we address are that business forecasting methods should be suitable for 1) a large number of people making forecasts, possibly without training in time series methods; and 2) a large variety of forecasting problems with potentially idiosyncratic features. Example: Assume an initial starting Ft of 100 units, a trend of 10 units, an alpha of 0.2, and a delta of 0.3. << /S /GoTo /D (section.1) >> xڝYK�� ϯ�QƊ�%�vA�"�C�$ ��A�j�5#K^=��!�,Yv�ۃ�V�I�},��>�ᗼ؈"��獄o%Ħ�25��<5�'�lM��w/۝4��e�oޝ��y��6�5F�F�Hm�٩o�~Ok��vͱ�p�f��B��N�T��8��@+ʏ�+��ҡ�Y�E��"��L-h�݉,˒�m�L��Β{G��6*�ǋBYj3+po�*�&�?�N��y�1V��x�H6�#��ގ~Qw)�Wj�~��|��Ɵ�;C��}û��&SO��ٷ[!޻��˜SފE�,5eA��Z�۠U��2*� �J��C�Y&��2q�0R��2��2��{��4��o�80Z�i��,V��q��1�*�B��C�:=gB�c 16 0 obj Our review discusses these and other strategies for improv- 20 0 obj Analysis of time series data should try to identify the behavior of the series, such as, long-term or short-term behavior, random or Quantitative Forecasting Methods. This is one of the pillars of proper financial planning. Background of the case study, demand forecasting and forecast accuracy is reviewed in next section. endobj %PDF-1.4 %�� >> 2. A large number of forecasting techniques are used in business enterprises. Qualitative methods 4. qualitative forecasting techniques—just because a forecaster is confi-dent in his/her forecast should not necessarily lend credence to the forecast, unless the forecaster can produce evidence to support it. Nominal group is a team-oriented forecasting technique that provides the forecasting framework. endobj Forecasting techniques based on time-series assume the future values of the series can be estimated from the past values. Download full-text PDF Download full-text PDF Read full-text. Such techniques are often used when historical data are not available, as is the case with the introduction of a new product or service, and in forecasting the impact of fundamental changes such as new technologies, environmental changes, cultural changes, legal changes, and so forth. Just like sales forecasting the demand for a certain product is also forecasted by the sellers to prepare or produce products accordingly. 1.2 Forecasting, planning and goals; 1.3 Determining what to forecast; 1.4 Forecasting data and methods; 1.5 Some case studies; 1.6 The basic steps in a forecasting task; 1.7 The statistical forecasting perspective; 1.8 Exercises; 1.9 Further reading; 2 Time series graphics. 2. Forecasting Techniques for Time Series Time Series Assumptions A time series is a set of observations xt each being recorded at a specific time t.In a continuous-time time series, the observations are made continuously during a specified time interval. 1. endobj The simple moving average method is used to calculate the mean of average prices over a period of time and plot these mean prices on a graph which acts as a scale. Naïve techniques - adding a certain percentage to the demand for next year. endobj Sales Forecasting is the process of using a company’s sales records over the past years to predict the short-term or long-term sales performance of that company in the future. The smaller the U-statistic, the better the forecasting technique is relative to the naïve method. Meaning of Forecasting 2. The time series type of forecasting methods, such as exponential smoothing, moving average and trend analysis, employ historical data to estimate future outcomes. All forecasting techniques assume that there is some degree of stability in the system, and “what happened in the past will continue to happen in the future”. endobj A time series is a group of data that’s recorded over a specified period, such as a company’s sales by quarter since the year 2000 or the annual production of Coca Cola since 1975. U < 1: The forecasting technique being used is better than the naïve method. Prior to … If actual demand turned out to be 115 rather What is the purpose of the forecast—how is it to be used? 3. Techniques. (Evaluating forecast accuracy) Forecasting is a technique that uses historical data as inputs to make informed estimates that are predictive in determining the direction of future … The survey method is generally for short-term forecasting, whereas statistical methods are used to forecast demand in the long run. Qualitative Forecasting Techniques Allocation planning looks to see if staffing needs can be met by reallocating current employees or if the business needs to access the external labor force. This is almost never true.Successful forecasting begins with a collaboration between the manager and the forecaster, in which they work out answers to the following questions. Forecasting Techniques: Demand forecasting is a difficult exercise. Technological forecasting is probably best performed by experts in the particular technology. There are different methods and ways that marketers use to define the probable demand that might happen in the future. augmented by the kind of quantitative techniques discussed in this unit, and this combined approach has much to commend it. 3. In Section 3 we present a time series model which is exible enough These can be classified into four broad categories: qualitative, time-series, causal models, and technological forecasting. 4. Forecasting methods fall into two major categories: quantitative and qualitative methods. He has brought his passion for improving sales performance management with analytics to InsightSquared. This is a great technique to avoid monetary loss in business. << /S /GoTo /D [22 0 R /Fit ] >> [Other Resource] Quantitative Techniques. 8 0 obj << /S /GoTo /D (section.5) >> 17 0 obj Survey Method: Survey method is one of the most common and direct methods of forecasting demand in the short term. Forecasting is rarely perfect (deviation is expected). The most common methods used in smoothing techniques of demand forecasting are simple moving average method and weighted moving average method. ￭ Quantitative Methods : Trend Effects in Exponential Smoothing. A quantitative approach stream (The basic steps in a forecasting task) They inherently rely on expert opinion, experience, judgment, intuition, conjecture, and other “soft” data. Role of Forecasting 3. Meaning of Forecasting: In preparing plans for the future, the management authority has to make some predictions about what is likely to happen in […] Further details on qualitative forecasting methods can be found in Chapter 3 of the book by Hyndman and Athanasopoulos (2014). 2.6 Forecasting by Time Compression (Udo Sglavo) 104 2.7 Data Mining for Forecasting: An Introduction (Chip Wells and Tim Rey) 112 2.8 Process and Methods for Data Mining for Forecasting (Chip Wells and Tim Rey) 120 2.9 Worst-Case Scenarios in Forecasting: How Bad Can Things Get? Qualitative Techniques: A qualitative forecasting technique relies on individual or group judgment. A manager generally assumes that when asking a forecaster to prepare a specific projection, the request itself provides sufficient information for the forecaster to go to work and do the job. U > 1: There is no point in using a formal forecasting method, since using a naïve method will produce better results. 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These two approaches are shown in Figure-10: Let us discuss these techniques (as shown in Figure-10). %�� Forecasting Methods and Principles: Evidence-Based Checklists J. Scott Armstrong 1 Kesten C. Green 2 Working Paper 128-clean August 1, 2017 ABSTRACT Problem: Most forecasting practitioners are unaware of discoveries from experimental research over the past half-century that can be used to reduce errors, often by more than half. << /S /GoTo /D (section.2) >> There are basically two approaches to forecasting: qualitative … Consumers’ behaviour is the most unpredictable one because it is motivated and influenced by a multiplicity of forces. *) /Dest [ 26 0 R /XYZ 0 325 null ] /Parent 24 0 R /Prev 27 0 R /Next 30 0 R >> endobj 29 0 obj << /Type /Page /Parent 103 0 R /Resources << /ColorSpace << /CS2 75 0 R /CS3 747 0 R >> /ExtGState << /GS2 74 0 R /GS3 744 0 R >> /Font << /TT3 70 0 R /TT4 72 0 R /C2_2 87 0 R /TT5 84 0 R /C2_3 69 0 R >> /ProcSet [ /PDF /Text ] >> /Contents 846 0 R /StructParents 11 >> endobj 30 0 obj << /Title (]jC��K�T�S��J�YpE��¢��) /Dest [ 29 0 R /XYZ 0 308 null ] /Parent 24 0 R /Prev 28 0 R /Next 32 0 R >> endobj 31 0 obj << /Type /Page /Parent 103 0 R /Resources << /ColorSpace << /CS2 75 0 R /CS3 747 0 R >> /ExtGState << /GS2 74 0 R /GS3 744 0 R >> /Font << /TT3 70 0 R /TT4 72 0 R /C2_2 87 0 R /TT5 84 0 R /C2_3 69 0 R >> /ProcSet [ /PDF /Text ] >> /Contents 879 0 R /StructParents 14 >> endobj 32 0 obj << /Title (Ӧ5%�ղ%�h�*�#�¡��Įr䑶�|��T� K^;g��X�P��͈ͮ�/�6NC� ��) /Dest [ 31 0 R /XYZ 0 573 null ] /Parent 24 0 R /Prev 30 0 R /Next 34 0 R >> endobj 33 0 obj << /Type /Page /Parent 103 0 R /Resources << /ColorSpace << /CS2 75 0 R /CS3 747 0 R >> /ExtGState << /GS2 74 0 R /GS3 744 0 R >> /Font << /TT3 70 0 R /TT4 72 0 R /C2_2 87 0 R /TT5 84 0 R /C2_3 69 0 R >> /ProcSet [ /PDF /Text ] >> /Contents 887 0 R /StructParents 15 >> endobj 34 0 obj << /Title (��=Q�c��[��3��Gm0V�x?�m�ۜ��.-#B) /Dest [ 33 0 R /XYZ 0 276 null ] /Parent 24 0 R /Prev 32 0 R >> endobj 35 0 obj << /Type /Page /Parent 136 0 R /Resources << /ColorSpace << /CS2 75 0 R /CS3 747 0 R >> /ExtGState << /GS2 74 0 R /GS3 744 0 R >> /Font << /TT4 70 0 R /TT5 71 0 R /TT6 84 0 R /TT7 96 0 R /C2_3 87 0 R /C2_4 109 0 R /C2_5 69 0 R >> /ProcSet [ /PDF /Text ] >> /Contents 921 0 R /StructParents 20 >> endobj 36 0 obj << /Title (\\�9v�Y�F��Ŀ��A) /Dest [ 35 0 R /XYZ 0 655 null ] /Parent 17 0 R /Prev 24 0 R /Next 46 0 R /First 37 0 R /Last 44 0 R /Count 5 >> endobj 37 0 obj << /Title (��M�X��]�\\�nQi��:��{��7��7) /Dest [ 35 0 R /XYZ 0 611 null ] /Parent 36 0 R /Next 39 0 R >> endobj 38 0 obj << /Type /Page /Parent 136 0 R /Resources << /ColorSpace << /CS2 75 0 R /CS3 747 0 R >> /ExtGState << /GS2 74 0 R /GS3 744 0 R >> /Font << /TT5 70 0 R /TT6 72 0 R /C2_2 87 0 R /TT7 96 0 R /TT8 71 0 R /TT9 84 0 R /C2_3 69 0 R >> /ProcSet [ /PDF /Text ] >> /Contents 932 0 R /StructParents 21 >> endobj 39 0 obj << /Title (R�y&c�K,Pۃ3�S�42`dU��lX��f.B6Q��V��j) /Dest [ 38 0 R /XYZ 0 370 null ] /Parent 36 0 R /Prev 37 0 R /Next 40 0 R >> endobj 40 0 obj << /Title (�px-[R�@�R�ET�z�) /Dest [ 38 0 R /XYZ 0 334 null ] /Parent 36 0 R /Prev 39 0 R /Next 42 0 R >> endobj 41 0 obj << /Type /Page /Parent 136 0 R /Resources << /ColorSpace << /CS2 75 0 R /CS3 747 0 R >> /ExtGState << /GS2 74 0 R /GS3 744 0 R >> /Font << /TT3 70 0 R /TT4 84 0 R /TT5 72 0 R /C2_2 87 0 R /C2_3 69 0 R >> /ProcSet [ /PDF /Text ] >> /Contents 942 0 R /StructParents 22 >> endobj 42 0 obj << /Title (�bJ��Z�P5y>�h�٘�n�ؑ�y��Y�M�?��x�B�2�o%�S,��$�Y_�9�_\ \n��C�A�X�`p,U;,��) /Dest [ 41 0 R /XYZ 0 661 null ] /Parent 36 0 R /Prev 40 0 R /Next 44 0 R >> endobj 43 0 obj << /Type /Page /Parent 136 0 R /Resources << /ColorSpace << /CS2 75 0 R /CS3 747 0 R >> /ExtGState << /GS2 74 0 R /GS3 744 0 R >> /Font << /TT2 84 0 R /TT3 70 0 R /C2_1 69 0 R >> /XObject << /Im2 146 0 R /Im3 147 0 R >> /ProcSet [ /PDF /Text /ImageC ] >> /Contents 956 0 R /StructParents 24 >> endobj 44 0 obj << /Title (��s�6"��G��q�.�2��[ī��|#$@) /Dest [ 43 0 R /XYZ 0 714 null ] /Parent 36 0 R /Prev 42 0 R >> endobj 45 0 obj << /Type /Page /Parent 136 0 R /Resources << /ColorSpace << /CS2 75 0 R /CS3 747 0 R >> /XObject << /Im1 160 0 R >> /ExtGState << /GS2 74 0 R /GS3 744 0 R >> /Font << /TT3 70 0 R /TT4 84 0 R /TT5 71 0 R /C2_1 69 0 R >> /ProcSet [ /PDF /Text /ImageC ] >> /Contents 976 0 R /StructParents 27 >> endobj 46 0 obj << /Title (K��R��ֲ��i�S�U�) /Dest [ 45 0 R /XYZ 0 244 null ] /Parent 17 0 R /Prev 36 0 R /First 47 0 R /Last 53 0 R /Count 5 >> endobj 47 0 obj << /Title (�|��. 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