forecasting in material management
- 1. METHODS OF FORECASTING BY AYSHATHUL FEMITHA 9897
- 2. FORECASTING • Forecasting is a process of predicting or estimating the future based on past and present data. • Forecasting provides information about the potential future events and their consequences for the organization. • It may not reduce the complications and uncertainty of the future.
- 3. STEPS IN FORECASTING Analyzing and understanding the problem Collecting and analyzing data Estimating future events Comparing results Follow up action
- 4. TYPES OF FORECASTING • nearer term forecasting horizons • for events where there is plenty of quantitative data available. • Eg; time series method, moving average method OBJECTIVE METHOD SUBJECTIVE METHOD • More distant time periods • or events with a lack of historical quantitative data will often call for more subjective approaches. • Eg; visionary forecast, panel consensus, market research
- 5. VISIONARY FORECAST • Visionary forecast is where ‘visionary’ forecasters or ‘futurologists’ attempt to predict through personal opinion and judgments. • The method is characterized by subjective guesswork and imagination, and in the method is non-scientific. • A set of possible scenarios about the future is prepared by a few experts in the light of past events. • At one time, visionary forecasts were felt to be too subjective to be used in marketing decision making.
- 6. • The success of Microsoft in being ahead of its competitors in many areas is down to visionary forecasts. • The company has a system whereby senior managers are encouraged to think about the future in the widest possible sense, including, for example, social trends and developments, and how these developments, potentially open up new opportunities for Microsoft for future product development.
- 7. PANEL CONSENSUS • The panel consensus method, is by bringing the internal members or experts from all level in the company together, and have a open discussion about a product or activity, any people is allowed to give their own opinions, and the meeting will end when a consensus is reached • Panel of experts are encouraged to communicate and discuss matters in relation to the future prospects of what is to be predicted. • Developed primarily for long-term forecasting
- 8. ADVANTAGES: • Company executives' involvement might make the forecast fit better with company’s situation, since these people make the policy. • This method is relatively quick.
- 9. DISADVANTAGES: • This method highly relies on experience and opinion, and with just a little resource to the fact. • A strong personality person might have more affect on forecasting or lower employee levels are intimidated by higher levels of management. • Problems of personal and social bias influencing the members of the panel arises. • Methods of this nature often do not arrive at a true consensus of opinion because of the effects of such bias.
- 10. MARKET RESEARCH • Market research involves studying a representative sample of a market involving a systematic formal procedure for evolving and testing hypotheses about a market. • For any valid information to be obtained, two reports should be made over a period of time so one can be compared with the other and conclusions drawn. • This necessitates the collection of market data from questionnaires, surveys, published statistics, marketing intelligence reports and time series analyses of market variables.
- 11. • Due to the relatively high cost of this technique, it is only used in cases where there is a considerable financial risk • which generally means it is restricted to large companies. • The major application of this technique for sales forecasting is in the area of predicting new product sales by investigating consumer reaction to a new product concept or prototype.
- 12. Types of market research • Ad Tracking • Advertising • Brand equity • Brand attribute research • Brand name • Commercial eye tracking • Concept testing • Buyer decision making process
- 13. CLASSIFICATION OF MARKET RESEARCH Problem-Identification Research • Research undertaken to help identify problems which are not necessarily apparent on the surface and yet exist or are likely to arise in the future. • Examples: market potential, market share, image, market characteristics, sales analysis Problem-Solving Research • Research undertaken to help solve specific marketing problems. • Examples: product, pricing, promotion, and distribution research
- 14. MARKETING RESEARCH PROCESS • Step 1: Defining the Problem • Step 2: Developing an Approach to the Problem • Step 3: Formulating a Research Design • Step 4: Doing Field Work or Collecting Data • Step 5: Preparing and Analyzing Data • Step 6: Preparing and Presenting the Report
- 15. CONCLUSION • Thus, forecasting involves detailed analysis of the past and present events with a view to draw conclusions about future events. • And to get a clear cut idea about probable events in the future