Types of Forecasting Methods
TYPES OF FORECASTING METHODS
Qualitative methods: These types of forecasting methods are based on judgments or opinions, and are subjective in nature. They do not rely on any mathematical computations.
Quantitative methods: These types of forecasting methods are based on quantitative models, and are objective in nature. They rely heavily on mathematical computations.
QUALITATIVE FORECASTING METHODS
Qualitative Methods
Executive Opinion Market Research Delphi Method
Approach in which a group of managers meet and collectively develop a forecast. Approach that uses surveys and interviews to determine customer preferences and assess demand. Approach in which a forecast is the product of a consensus among a group of experts.
QUANTITATIVE FORECASTING METHODS
Quantitative forecasting methods can be divided into two categories: time series models and causal models.
Quantitative Methods
Time Series Models Causal Models
Time series models look at past patterns of data and attempt to predict the future based upon the underlying patterns contained within those data. Causal models assume that the variable being forecasted is related to other variables in the environment. They try to project based upon those associations.
TIME SERIES MODELS
Model Description
Naïve Uses last period’s actual value as a forecast
Simple Mean (Average) Uses an average of all past data as a forecast
Simple Moving Average Uses an average of a specified number of the most recent observations, with each observation receiving the same emphasis (weight)
Weighted Moving Average Uses an average of a specified number of the most recent observations, with each observation receiving a different emphasis (weight)
Exponential Smoothing A weighted average procedure with weights declining exponentially as data become older
Trend Adjusted Exponential Smoothing An exponential smoothing model with a mechanism for making
Qualitative methods: These types of forecasting methods are based on judgments or opinions, and are subjective in nature. They do not rely on any mathematical computations.
Quantitative methods: These types of forecasting methods are based on quantitative models, and are objective in nature. They rely heavily on mathematical computations.
QUALITATIVE FORECASTING METHODS
Qualitative Methods
Executive Opinion Market Research Delphi Method
Approach in which a group of managers meet and collectively develop a forecast. Approach that uses surveys and interviews to determine customer preferences and assess demand. Approach in which a forecast is the product of a consensus among a group of experts.
QUANTITATIVE FORECASTING METHODS
Quantitative forecasting methods can be divided into two categories: time series models and causal models.
Quantitative Methods
Time Series Models Causal Models
Time series models look at past patterns of data and attempt to predict the future based upon the underlying patterns contained within those data. Causal models assume that the variable being forecasted is related to other variables in the environment. They try to project based upon those associations.
TIME SERIES MODELS
Model Description
Naïve Uses last period’s actual value as a forecast
Simple Mean (Average) Uses an average of all past data as a forecast
Simple Moving Average Uses an average of a specified number of the most recent observations, with each observation receiving the same emphasis (weight)
Weighted Moving Average Uses an average of a specified number of the most recent observations, with each observation receiving a different emphasis (weight)
Exponential Smoothing A weighted average procedure with weights declining exponentially as data become older
Trend Adjusted Exponential Smoothing An exponential smoothing model with a mechanism for making