What are some of the potential benefits of a more formalized approach to forecasting? Q2.Prepare a Weekly forecast for the next four weeks for each product. Briefly explain why you chose the methods you used.
Forecasting helps to predict the future orders, in turns it ensures customers demands are constantly being fulfilled; which eventually makes the customers happy. Forecasting helps the company to remain competitive, it reduces inventory costs. Besides, forecasting helps to prepare for an increase or drop in sales, it saves on labour costs. And all these factors bring higher profit to the company.
Using Linear Methods to predict the next four weeks forecast
Now, I’ll show the forecast of product 2 using the simple/naive approach.
The reasons of using naive/intuitive approach are many. Some of them are it is very cheap, quick and easy to prepare. As a result it is widely used by all level of managers. It does not require complicated use of mathematics, it is time consuming and it is easily understandable.
The use of both forecasting methods will allow the manager to make decision on which product to place emphasis on. Though naive approach is applicable for short term decision making, keeping the managers disdain in mind, I have used this approach to calculate forecasting for the product 2. Moreover, it is very easy, cheap and time consuming to prepare.