Forecasting activity is an important activity in the business. This is considered to be an important input for many activities in the organization. Forecasting is of two types namely long ranges forecasting and short range. The Long range forecast goes as input for long range decision making like technology selection, capacity planning. From the long range forecasts, the medium term forecasts are derived and used as input for the activity like aggregate planning. From the medium term forecasts the short range forecasts are outlined and go as input for activity like scheduling. Selection and usage of forecasting method differs according to whether the company needs forecast to the existing product or for a new product. When you forecast for the existing product, the past demand data is taken into consideration, the pattern for the demand is analyzed, then appropriate forecasting technique is chosen to predict the future. From the predicted demand the manager adds his own intuitions and experience based on the situation to change the estimated demand to suit the real life situation.
In the case of new product, since there is no past data available, the organization depends upon the qualitative methods of forecasting. Experts, customers, sales persons opinions are solicited.
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