What and Why do Organizations Forecast?
—
Xiaorui(Jeremy) Zhu
08/25/2019
It is a prediction or estimate of an actual outcome expected in a future time period or for another situation.
The purpose: inform the process of planning.
The purpose of planning: a course of action so that your decision are based on more reliable forecasts.
Weather Forecast:
Stock Price:
Purpose:
Information:
Value:
Analysis:
System:
Evaluation:
Costs:
Sales/Activities
Social and Political Trends
Projects
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Depends on the Problem Area
Forecasting object
Forecasting horizon
Forecasting frequency
Structure derived from decision making process
Forecasts required to support planning and decision making
Typically, we assume that the observations are equally spaced in time.
A set of comparable observations ordered in time. The values may refer to either a point in time (“the current value of the Dow Jones Index is 17,000”) or an aggregate over a period of time (“total sales for the last month were 350 units”).
Trend: A time series contains a trend if it shows systematic movements (e.g., increase or decrease) over an extended period.
Seasonality: A time series has a season component if it displays a recurrent pattern with a fixed and known duration (e.g., months of the year, days of the week).
Cycle: A time series has a cyclical component if it displays somewhat regular fluctuations about the trend but those fluctuations have a periodicity of variable and unknown duration, usually longer than one year (e.g., a business cycle).
