What's The Importance Of Forecasting In Planning Process?

Without forecasting in a business there is no possibility of making any plans and being able to stick to those plans.

• Forecasting

Forecasting is the process of determining the amount of future business that a company may receive, whilst planning is using the information and putting it to good use. The company will aim to meet their goals by using their plans. Every single company uses some kind of forecasting and planning process to ensure that the demand for their product or their service will be met. For most businesses, there is one product that creates the most revenue out of all their products and services. If the demand for their product or service is not met through proper planning then the company will be in the position to lose the majority of its business.

• Forecasting methods

Before you make a forecast, it's always important to go about establishing a consistent method that should be used. Common and rested methods include regression analysis, exponential smoothing and the moving average method. Moving average just takes into account the group of previous averages and then compares them to any change in production over a given time frame.

Exponential smoothing compares the last forecast against their current product demand to see how the two compare.

Then there's regression analysis, and this is a very different way of looking at the moving average. It will use a graph to show the amount of change that has occurred over a period of time, instead of just showing numbers.

Do remember, that in order to forecast the demand for a product properly, a time period needs to be selected. Shorter periods of study will usually provide higher accuracy given that unexpected changes in the market occur over longer periods.