Method or technique for estimating many

future aspects of a business or other

operation.
It is used in the practice of customer demand
planning in every day business forecasting for
manufacturing companies.
There are three types of forecasting
1.Qualitative or Judgmental methods
2.Extrapolative or Time series methods
3.Causal or Explanatory methods
Rely on experts or managers opinion in
making prediction for the future.
Useful for medium to long range forecasting
tasks.
Provide a basis for some important decisions.
Three important Qualitative methods are :-
Delphi Technique - Develop forecast through
group consensus.
Market Surveys Involves the use of
questionnaires, consumer panels & tests of
new products & services.
Scenario Writing - process of analyzing
possible future events by considering
alternative possible outcomes.
Use past history of demand.
Comprised of four separate components:
trend component, cyclical component,
seasonal component, and irregular
component.
The objective of this method is to identify the
pattern in historic data & extrapolate this for
future.
TYPES OF EXTRAPOLATIVE METHODS
Moving Average Method - average of demands
occurring in several of the most recent
periods.
Weighted Moving Average - allows for varying
weighting of old demands.
Exponential Smoothing exponentially
decreases the weighting of old demands.
 A statistical forecasting model based on
historical demand data as well as on variables
believed to influence demand.
 There are two types of Causal forecasting
methods
Regression analysis - a functional relationship
is established between variables from the
historical data and then used to forecast
dependent variable values.
Econometric method an extension of
regression analysis and include a system of
simultaneous regression equations.
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