FORECASTING

A number of procedures exist, by which forecasts may be developed. Some, such as subjective opinion forecasts, are not acceptable for use in most contemporary organizations. A somewhat more sophisticated forecasting procedure which may be acceptable is the index-based forecast. Unfortunately, these forecasts are only as good or as bad as the index that serves as the foundation, and as good or as bad as the degree of correlation between the actual demand and the forecast based on the index (Bryman & Bell, 2004).

One categorization scheme for forecast methods is the grouping of methods as either qualitative in nature or quantitative in nature. Qualitative forecasting methods are essentially opinion estimates, which may be quite accurate at times. One type of opinion involves linking something new with something old to develop an historical analogy. As an example, one may be

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tionnaires or interviews that are administered in a series, with each new questionnaire or interview containing feedback from the responses to the previous questionnaire. The iterative procedure is continued until a consensus is attained (Bryman & Bird, 2004). The best forecasts are quantitative in nature, and they frequently are developed through the application of statistical procedures. Among the most widely applied quantitative forecasting procedures are the following (Lind, Marchal, & Wathen, 2005): Trend line projections, which are developed through the use of regression equations Cyclic demand projections, which consider random variations, and which require the use of regression equations Curvilinear regression projections, which consider multiple relationships among many variables Exponentially weighted moving average projections, which are valid only for short-term projections As a general rule, the most appropriate forecasting technique will be one that is effective in forecasting demand over time. Further, the simplest model that can yield the desired results usually is the preferred model. An elaborate model may lead to more accurate forecasts, but also may be more costly and difficult to implement (Chase, Ja
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Approximate Pages = 5 (250 words per page)

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