ForecastingTechniques
AvercastLLC @avercast
1.  Gatherdataandinformationregardingthefutureevent.
2.  Analyzethedataandinformation.
3.  Combinetheanalysisandjudgmenttomakeaprediction.
4.  Deployeffortstoaddressthefutureopportunityandneed.
Howaredifferent forecastsconstructed?
StableDemandPattern
Ifdemandpatternsarestableandthereissufficienthistoricaldata,
thenquantitativemethodsarebetterrelieduponforaccurate
forecasting.
WhenDataisScarce
Withlittleornohistoricaldata,suchaswithanewproductor
technology,qualitativeinputs(opinionsandjudgements,from
experienceonsimilarproducts)arerelieduponforaccuracy.
TimeSeries
Quantitativeforecastingmethodsrequireatimeseries,tofunction.
Atimeseriesisasetofdataarrangedinchronologicalorder.
Observingtimeseriesdatausuallydisplaysrandomness,trends,
seasonalityandcycles.
CommonQuantitativeForecastingMethods
MovingAverage
WeightedMovingAverage
TrendProjection
Naïve
MultiplicativeSeasonal
AssociativeMethods(regressionandcorrelation)
MovingAverage
MovingAverageforecastingtakestheaverageoverapasttime
horizontouchingrealtime.
Forexample,thetimehorizoncouldbeonemonth,thereforethe
forecastwouldbetheaveragesalesoverthepastmonth.Or,ifthe
timehorizonweretwoweeks,theforecastwouldbetheaverage
salesoverthepasttwoweeks,etc.
WeightedMovingAverage
Weightedmovingaverageissimilartomovingaverage,exceptthat
wewouldapplyweightsofimportancetotheproducts,trends,or
timehorizonsofmostimportance.
TrendProjection
Themethodofforecastingbasedupontheleastsquares
mathematicaltechniquefittingthelineofbestfit.
NaïveMethod
Naïvemethodsimplyforecaststheexactamountthatwassoldlast
period.
Forexample,iflastDecemberyousold200chairs,youwillforecast
200chairsthisDecember.Youwillnottakeintoaccountanyother
factors.
MultiplicativeSeasonal
MultiplicativeSeasonalforecastingisacombinationof
randomnessandtrend.
StepsthatallowMultiplicativeSeasonalforecastingare:
1.  Computeanaveragesalesbytimehorizon.
2.  Computetheoverallsalesaverageoftimehorizoncombined.
3.  ComputetheSeasonalIndexpereachmonthbydividingthe
eachtimehorizonssalesbytheoverallaverage.
MostCommonQualitativeMethods
•SalesForceComposite:Estimatesfromfieldsalespeopleare“rolledup”oraggregated.
•FieldSalesandProductLineManagement:Aggregatedforecastsfromfieldsalespeopleare
reconciledwithprojectionsfromproductlinemanagers.
•ExecutiveOpinion:Marketing,production,andfinancemanagersjointlypreparetheforecast.
•Delphi:Acostlybuteffectivemethodwhereexpertsindividuallydevelopforecasts,sharetheir
forecasts,andthenrevisetheirforecastsuntilconsensusisreached.
•MarketSurveys:Questionnairesorinterviewsgiventopotentialcustomerstolearnabout
consumerbehavior.

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