Practical Guide to Business Forecasting Review
This is a book that gives everything you need to know about business forecasting & planning in simple and easy-to-understand language. It is written with practitioners in mind as it emphasizes through out the book practical aspects of forecasting & planning. It discusses case after case how it is used in business, problems encountered, and lessons learned.
The book is divided into fifteen parts. Part I deals with the ‘Basics’ of business forecasting, and covers issues such as who are our customers (end-users), what their expectations are, which forecasts are easier and more difficult to prepare, who should participate in the forecasting process, what role judgment plays in forecasting & planning, and so on. To succeed in forecasting, both forecasters and end-users have to work together as a team. Part II describes why it is important and how to achieve it.
When we think of business forecasting, the first thing that comes to our mind are models. Models are important, but they are not the be-all-end of forecasting. The other part is the forecasting process which is as important as models, if not more. The forecasting process includes, among other things, how input from various functions is obtained and used, how data is analyzed and treated, and how a model is selected. After statistical forecasts are prepared, how judgment is overlaid to arrive at the final numbers. Judgment is used to account for elements that have a bearing on forecasts but cannot be quantified and for information that was not available at the time forecasts were prepared. After forecasts are finalized, how they are monitored and updated. Over the last two decades the forecasting process has evolved from a Silo to Sales & Operation Planning (S&OP) to Collaborative, Planning, Forecasting and Replenishment (CPFR). Part III deals with issues of the forecasting process, and Part IV, S&OP, and Part V, CPFR.
Forecasts play an important role in revenue management. Business strategies such as what price to charge when and where, which products to introduce and which ones to abandon, which markets to enter and which ones to exit, and which products to produce when and where—they all impact revenue. Forecasts help to develop the right business strategy. Part VI covers issues of revenue management. Before preparing forecasts, one has to decide about the approach, that is, whether forecasts should be initiated from the top, bottom or somewhere in the middle, such issues are covered in Part VII.
Marketing research plays an important role in forecasting the demand for new products, detecting competitive activities, determining promotional lift and sensitivity of sales to price, and so on. Such issues are covered in Part VIII.
For an efficient forecasting operation we need a forecasting system that mechanizes the forecasting processes. What the forecasting system is and how to select the right one are discussed in Part IX.
Data plays an important role in forecasting. Before plugging it into a model one has to clean and massage the data. Part X describes types of data available internally and externally, and what should be done with it before using.
The forecasting models are tools of forecasting. Part XI describes time series models, and Part XII, regression models. To measure forecast performance, one needs to know the error measures, which are described in Part XIII.
No matter how accurate the forecasts are, they are useless unless they are used. This raises the question of presenting and selling forecasts to end-users. Part XIV discusses issues of presenting and getting buy-in. To have an efficient, effective and on-going forecasting function, one needs to have a forecast training program in place. Part XV describes how to go about in setting up a training program, and how to monitor and improve.
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