Forecasting with Indices

Forecasting with Indices
Stephanie Petrie
QRB 501
[ April 11, 2011 ]
Ron Johnson

Forecasting with Indices
Forecasting is done so that businesses can be better equipped to predict future possibilities.   When forecasting is done the first decision to be made is the type of forecasting to be done; qualitative, casual or time series (Vanguard Software Corporation, 2011).   The paper is about two of the types of forecasting; qualitative and time series.
Qualitative Forecasting
Qualitative forecasting is done when data is not readily available.   For instance, a new company starting up and has no historical data to create a forecast model.   In this case usually a panel of experts in the field will provide that input needed to make the forecast decisions (Sahu, 2011).
Time Series Forecasting
Time Series Forecasting is done when trying to find a trend based on historical data.   The data can be used to tell a company what inventory may be need for the coming months or seasons.   Usually time forecasting is done for short-term because baring any major changes in the business the forecast is fairly accurate (Sahu, 2011).
Below shows the data assembled for the Summer Historical Inventory, Table 1 contains data, which shows the four years of data; the total inventory used for each year, the average used for each month, the percentage for each month, and the forecast amount of inventory needed for the coming year.   Figure 1 shows the average units used for each month during the four years.   Figure 2 compares the average units used for the four years and the projected units needed for the coming year.

Table 1 | |
Summer Historical Inventory Data |
Typical Seasonal Demand for Summer Highs |
Actual Demands (in units) |
| | | | | | | | |
Month | Year 1 | Year 2 | Year 3 | Year 4 | Total | Average | Index | Forecast |
1 | 18,000 | 45,100 | 59,800 | 35,500 | 158,400 | 39,600 | 0.077924 | 42,686 |
2 | 19,800 | 46,530 | 30,740 | 51,250 |...