Forecasting Flashcards
What is forecasting?
The use of existing data to predict future trends/ events. This allows the business to make plans for the future.
What is qualitative forecasting?
Forecasting based on views, opinions, experience and understanding .
What are the three methods of qualitative forecasting?
1) Delphi technique
2) Brainstorming
3) intuition
What is the Delphi technique?
This is where experts are asked their opinions on Linley outcomes of a particular situation. Wouldn’t base decision on it but provides good starting point.
What is brainstorming?
Individuals discuss their ideas for solutions to a problem
What is intuition?
Managers rely on their own knowledge and previous experience to make a decision
What is quantitative forecasting?
Using time series analysis, which is a moving average.
What is time series analysis?
The use of a moving average using past data, calculated over a period time, which is the n projected to give forecast figures for the future
How do you calculate the 3 point moving average?
Add three sales together add divide by 3 to find average
How do you calculate the variation in TSA?
Calculate the difference between sales and the 3 point moving average. Remember to add + or - sign
How do you do time series analysis?
1) find 3PMA
2) calculate variation
3) plot and draw line of best fit
4) extend line to where estimating trying to follow trend
5) read off and + or - sum of variation
How do you find the sum of variation in TSA?
Add together all variations and divide by how many
What is the cyclical variation in TSA?
The average variation for each period of time eg every period 3
What are the advantages of TSA?
- helps identify trends/ patterns of sales
- allows you to plan
- helps predict future
What are the disadvantages of TSA?
- the forecast will only be as reliable as the data used
- based on past and things change
- should be used with qualitative as well
- doesn’t take into account change of objectives ie survival to growth
