What Is Forecasting? Important Features Steps Importance

What is Forecasting? Meaning

Forecasting is a procedure of predicting or estimating the futurity based on past times as well as introduce data. Forecasting provides information nearly the potential futurity events as well as their consequences for the organisation. It may non trim back the complications as well as dubiety of the future. However, it increases the confidence of the management to brand of import decisions. Forecasting is the footing of premising. Forecasting uses many statistical techniques. Therefore, it is also called every bit Statistical Analysis.

Image Credits © TYanceyIV.

Features of Forecasting

Peculiarities, characteristics or features of forecasting are every bit follows:-

1. Forecasting inwards concerned amongst futurity events.
2. It shows the probability of happening of futurity events.
3. It analysis past times as well as introduce data.
4. It uses statistical tools as well as techiques.
5. It uses personal observations.

Steps inwards Forecasting

Procedure, stages or full general steps involved inwards forecasting are given below:-

1. Analysing as well as agreement the problem : The director must kickoff seat the existent employment for which the forecast is to survive made. This volition assistance the director to prepare the orbit of forecasting.
2. Developing audio foundation : The administration tin railroad train a audio foundation, for the futurity afterwards considering available information, experience, type of business, as well as the charge per unit of measurement of development.
3. Collecting as well as analysing data : Data collection is fourth dimension consuming. Only relevant information must survive kept. Many statistical tools tin survive used to analyse the data.
4. Estimating futurity events : The futurity events are estimated past times using tendency analysis. Trend analysis makes provision for or then errors.
5. Comparing results : The actual results are compared amongst the estimated results. If the actual results tally amongst the estimated results, at that spot is nil to worry. In instance of whatever major divergence betwixt the actuals as well as the estimates, it is necessary to honour out the reasons for miserable performance.
6. Follow upwards action : The forecasting procedure tin survive continuously improved as well as refined on the footing of past times experience. Areas of weaknesses tin survive improved for the futurity forecasting. There must survive regular feedback on past times forecasting.

Importance of Forecasting

Merits, significance or importance of forecasting involves next points:-

1. Forecasting provides relevant as well as reliable information nearly the past times as well as introduce events as well as the probable futurity events. This is necessary for audio planning.
2. It gives confidence to the managers for making of import decisions.
3. It is the footing for making planning premises.
4. It keeps managers active as well as warning to confront the challenges of futurity events as well as the changes inwards the environment.

Limitations of Forecasting

Demerits, criticism or limitations of forecasting involves next points:-

1. The collection as well as analysis of information nearly the past, introduce as well as futurity involves a lot of fourth dimension as well as money. Therefore, managers own got to residual the terms of forecasting amongst its benefits. Many pocket-size firms don't practise forecasting because of the high cost.
2. Forecasting tin alone jurist the futurity events. It cannot guarantee that these events volition own got house inwards the future. Long-term forecasts volition survive less accurate every bit compared to short-term forecast.
3. Forecasting is based on surely assumptions. If these assumptions are wrong, the forecasting volition survive wrong. Forecasting is based on past times events. However, history may non repeat itself at all times.
4. Forecasting requires proper sentence as well as skills on the business office of managers. Forecasts may instruct incorrect due to bad sentence as well as skills on the business office of or then of the managers. Therefore, forecasts are bailiwick to human error.