Forecasting and Its Applications

A Requirement of the Subject,

Quantitative Techniques in Decision Making

Submitted to:

PROF. REYNALDO AMBAOPCU Professor

Submitted by:

ARMI S. JOVERO(Master in Management, Major in Educ. Management)

Contents

I. Topic

II. Definition/s, Concepts/ Characteristics, Application, Advantages

and Disadvantages

III. Description of the Nature of Work

IV. Application

V. Conclusion and Recommendation

TOPIC

Forecasting and Its Applications

II

Definition/s, Concepts, Characteristics, Application, Advantages and Disadvantages

Forecasting Defined

Forecasting is…

the process of analyzing current and historical

data to determine future trends.

… a planning tool that helps management in its

attempts to cope with the uncertainty of the

future, relying mainly on data from the past

and present and analysis of trends.

… is the process of making statements about

events whose actual outcomes (typically)

have not yet been observed.

… is the estimation of the value of a variable (or

set of variables) at some future point in time.

Concepts/ Characteristics of Forecasting

Business forecasting refers to the analysis of past and present

economic conditions with the object of drawing inferences about

probable future business conditions. The process of making definite

estimates of future course of events is referred to as forecasting and

the figure or statements obtained from the process is known as

‘forecast’ future course of events is rarely known. In order to be

assured of coming course of events, help is taken of an organized

system of forecasting. These are two aspects of scientific business

forecasting.

Characteristics of Business Forecasting

1. Based on past and present conditions: The business forecasting is

based on past and present economic condition of the business. To

forecast the future, various data, information and facts concerning to

economic condition of business for past and present are analyzed.

2. Based on mathematical and statistical methods: The process of

forecasting includes the use of statistical and mathematical methods.

By using these methods the actual trend which may take place in

future can forecasted.

3. Period: The forecasting can be made for long term, short term,

medium term or any specific term.

4. Estimation of future: The business forecasting is to forecast the

future regarding probable economic conditions.

5.Scope: The forecasting can be physical as well as financial.

Application

Business forecasting acquires an important place in

every field of the economy. Business forecasting helps the

businessman and industrialists to form the policies and plans

related with their activities. On the basis of forecasting the

businessman can forecast the demand of the product, price

of the product, condition of the market etc. The business

decisions can also be reviewed on the basis of business

forecasting.

Where is forecasting applied?

1. In increasing profit and reduction in losses.

Every business is carried out with the purpose of

earning maximum profits, so by forecasting the future price

of the product and its demand the businessman can

predetermine the production cost, production and the level

of stock to be determined.

2. In Management decisions

The business forecasting provides us basis for

management decisions because in present time the

management has to take the decision in the atmosphere of

uncertainties. Also, the business forecasting explains the

future conditions and enables the management to select the

best alternative.

3. Useful to administration

On the basis of forecasting the government can control

the circulation of money, modify the economic, fiscal and

monetary policies to avoid the adverse effects of trade

cycles. So, with the help of forecasting the government can

control the expected fluctuations in future.

4. Basis for capital market

The business forecasting helps in estimating the

requirement of capital, position of stock exchange and the

nature of investors etc.

5. Useful in controlling the business cycles

The trade cycles cause various depressions in the

business such as sudden change in price level, increase in

the risk of business, increase in unemployment etc. By

adopting a systematic business forecasting the businessman

and government can handle and control the depression of

trade cycles.

6. To achieve the goals

The business forecasting help to achieve the objective

of business through proper planning of business activities.

7. Facilitates control

By business forecasting the tendency of black

marketing, speculation, uneconomic activities and corruption

can be controlled.

8. Utility to society

With the help of business forecasting the entire society

is also benefited because the adverse effects of fluctuations

in the conditions of business are kept under control.

Advantages and Disadvantages

Advantages:

1. Helps to Predict The Future

Forecasting does not provide you with a crystal ball to see exactly what will happen to the market and your company over the coming years, but it will help give you a general idea. This will provide you with a sense of direction which will allow your company to get the most out of the marketplace.

2. Keep Your Customers Happy

In order to keep your customers satisfied you need to provide them with the product they want when they want it. This advantage of forecasting in business will help predict product demand so that enough product is available to fulfill customer orders.

3. Learn From The Past

Looking at what has happened in the past can help companies predict what will happen in the future, thus making the company stronger and most likely more profitable.

4. Keeps Companies Looking Ahead

By forecasting on a regular basis, it forces companies to continually think about their future and where their company is headed. This will allow them to foresee changing market trends and keep up with the competition.

5. Save on Staffing Costs

One of the advantages of forecasting in business is that it allows companies to predict how much product will need to be produced to meet customer demand. From here a company can use this data to accurately determine how many employees they will need to have on hand to meet the required level of production.

6. Remain Competitive

A business that does not use forecasting techniques will likely succumb to their competition in a short time. Having a general idea of what sales to expect in the following period is very important. This will help a company prepare to meet customer demand, otherwise the customer will look to fulfill their needs elsewhere.

7. Receive Financing

In order to receive financing for new startups or to fund an existing enterprise, a forecast will need to be completed. The lender needs an estimate on the number of sales you will have within a given time period before they will consider lending out large sums of money.

8. Reduce Inventory Costs

Forecasting helps predict how much inventory should be on hand at any given time. By having the right amount of inventory, your company will be able to save on warehouse and transportation costs.

There will also be less risk of incurring obsolescence costs or having to discount products because you have a large surplus.

9. Helps Prepare for a Drop in Sales

A drop in sales is never a good thing for a company, however, this advantage of forecasting in business reveals sales drops which in turn, can be recognized and dealt with quickly.

10. Prepare for New Business

By forecasting demand, a company can see if an increase in sales is likely imminent. This will allow the company to prepare for this increase in business by providing extra staff or production facilities to meet this new level of demand.

Disadvantages:

1. The forecasting cannot be accurate because it is largely

based on future events which are not sure to exist.

2. The business forecasting is generally made by using

statistical and mathematical method. But the use of these

methods cannot claim to be able to make uncertain future

certain.

3. The underlying assumptions of business forecasting

cannot be satisfied simultaneously. In such a case the results

of forecasting will be misleading.

4. The forecasting cannot guarantee the elimination of errors

and mistakes. The managerial decision will be wrong if the

forecasting is wrong.

5. Factors responsible for economic changes are often

difficult to discover and to measure. Hence business

forecasting becomes an unnecessary exercise.

6. The business forecasting does not evaluate risks.

7. The forecasting is made on the basis of past information

and data and relies that economic events are repeated

under the same conditions. But there may be circumstances

where these conditions are not repeated.

8. Forecasting is not a continuous process while to be

effective it requires continuous attention.

III. Description of the nature of work

I have been the Head Teacher III of Mayor Gerardo Gorriceta

Sr. Memorial School, District of Pavia, for almost four years now with

8 teachers from Kindergarten to Grade VI.

I agree that the successful operation of the school requires a

competent school head. School administrators like me provide

instructional leadership and manage the day-to-day activities in the

school.

As an education administrator I have to set educational

standards and goals and establish the policies and procedures

required to achieve them. I supervise teachers. I develop academic

programs, monitor pupils’ educational progress, train and motivate

teachers, keep records in hard and soft copies, prepare budgets, and

perform many other duties. I also handle relations with parents, and

other internal and external stakeholders.

Furthermore, I have to set the academic tone and work actively

with teachers to develop and maintain high curriculum standards,

formulate the school’s mission and vision, and establish performance

goals and objectives. In line with these, I visit classrooms, observe

teaching methods, review instructional objectives, and examine

learning materials.

With the advent of School-Based Management, decision-

making authority lies on the shoulders of the school head with

collaboration from the stakeholders. The school head has greater

flexibility in setting school policies and goals, but when making

administrative decisions, I must pay attention to the concerns of

parents, teachers, pupils, and other members of the community.

IV. Application

Enhanced management of schools nowadays employs shared

Decision Making. It means ownership of decisions by a team of

stakeholders (teachers, pupils, parents, community). It is an effort to

transform conventional school organizations into pro-active Learning

Communities.

How is forecasting applied in my work as a school head?

Planning as one of the functions of a school head like me

entails forecasting of future conditions in school. Forecasting as part

of effective planning must also take into account unexpected

contingencies and making provisions for the structuring of activities,

projects and programs in the school.

To reiterate one of the meanings of forecasting as mentioned

earlier, it is a planning tool that helps management in its attempts to

cope with the uncertainty of the future, relying mainly on data from

the past and present and analysis of trends. Thus, forecasting is

fundamental in school planning.

Using the data gathered in the BEIS, EMIS and GESP with the

addition of S-A, S-E and S-Q, all of which are tools to gather data in

the different aspects of school management, the school head is

armed with the data needed in making decisions for the betterment of

the school and its stakeholders.

Increase on projected data pupil enrolment would mean

provision for needed teachers, accommodation facilities (buildings),

more classroom furniture (chairs/desks), support instructional

materials, references and the like as well as budgetary requirements

for school utilities (electric, water, telephone, internet connection).

Forecasting is also essential since it can serve as basis for

laying out the school’s 3-year and annual improvement plans as well

as its annual procurement plan, hence, collaborative efforts among

the stakeholders for the plan’s realization.

V. Conclusion and Recommendation

Using Forecasting in school management specifically in

decision making is truly important for a school administrator. With it

he/she can analysis trends in the increase or decrease of

performance indicators as to school level access, quality and

efficiency thus align activities, projects and programs and work for

the provision of needed resources (human, material, financial) to

ensure attainment of desired goals.

  The maintenance of current monitoring school practices is

necessary for the continued establishment of baseline data needed to

forecast future needs.