Effective Forecasting

Forecasting provides information that facilitates decision- making and planning. In the complex and turbulent environment of today, forecasts may go wrong and so would the plans based on these forecasts. This may prove hazardous for the company. But making plans not based on forecasts is more hazardous. Forecasting is therefore, necessary. Since future may not behave as predicted and deviations may occur, forecasting skills should improve to reduce the range of errors. This amounts to making forecasting effective. The following measures can help in increasing the effectiveness of forecasting:

1. Forecasting methods should be simple. Complex methods can confuse data rather than providing meaningful information.

2. Compare forecasts with the situation of “no change” changes may not always occur and “no change” situation may prove to be accurate many times.

3. Long range forecasts should not depend upon a single forecasting method. Several forecasting methods should be adopted and average of their results should be used to make prediction.

4. Forecasts should not be made for very long periods. Length of forecasts should be shortened to improve their accuracy. Accuracy of forecasts decreases as the time period of prediction increases.

5. Managerial skill should be improved to make reliable forecasts for planning decisions.

6. Forecasts should be bases on facts and figures and not personal biases of the forecaster.

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