Last updated August 24, 2023
What is forecasting?
Forecasting is the process of estimating or predicting future events, trends, or outcomes based on historical data, patterns, and relevant information. It involves using available data to make educated guesses about what is likely to happen in the future. Forecasting is widely used in various fields, including economics, weather, and supply chain management, among others.
The primary purpose of forecasting is to reduce uncertainty by making educated guesses about the future using available data and analysis methods. While forecasts are not guarantees of , they provide valuable information that helps individuals and organizations prepare for and respond to potential scenarios.
Why is it relevant?
In supply chain management, forecasting is particularly important. Organizations use forecasting to anticipate customer demand, plan production and inventory levels, manage resources, and optimize operations. Accurate forecasting can help businesses avoid , overproduction, and inefficient resource allocation.
What types of forecasting methods exist?
Forecasting methods can be broadly categorized into quantitative and qualitative approaches:
- Quantitative methods: These methods rely on numerical data and mathematical methods to make predictions. , , , and econometric models fall into this category.
- Quantitative methods: This method relies on expert judgment, opinions, and subjective insights to make predictions. Delphi method, focus groups, and expert panels are examples of qualitative approaches.
- Hybrid methods: Some forecasting approaches combine elements of both quantitative and qualitative methods to leverage their strengths.