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Forecasting is the process

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Forecasting is the process of making statements about events whose definite outcomes have not
yet been observed. Forecasting is used by companies to decide how to allot their budgets for
future period of time. This is usually based on demand for the goods and services in comparison
to the cost of producing them. Investors use forecasting to find out if events affecting a company,
for instance sales expectations, will raise or reduce the price of shares in that company.
Forecasting also gives a vital benchmark for firms which have a long-term perception of
operations but only 49% of salespeople believe their company’s sales forecast to be accurate.
Demand forecasting is the part of predictive analytics devoted to know consumer demand for
goods or services. Knowledge of how demand will change enables the supplier to maintain the
right amount of stock on hand. If demand is miscalculated, sales can be lost caused by the lack of
supply of goods. If demand is overvalued, the supplier is left with an excess that can also be a
financial exhaust. Understanding demand makes a company more competitive in the market.
Understanding demand and the ability to precisely forecast it is essential for competent suppliers,
manufacturers, and retailers.
The type of forecasting method you select depends on the nature of your item. Are there seasonal
trends? Is demand stable, cyclical or periodic? Are trends strong or limited? Is the item new? As
each item you forecast has a diverse history you should choose a method most suitable to each
item. Some forecasting methods are
Moving Averages
Exponential Smoothing
Regression Analysis Models
Hybrid Forecasting Methods
Spectral Analysis
Custom Forecasting Models

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