Forecasting

Forecasting is an important business tool.  It is used for sales, cost of goods sold, and in pro-forma accounting and financial statements, to name only a few.  Research the topic of “Forecasting” and describe three mathematical methods used for forecasting, and where each method is most effective, and why.  How would you respond to those who claim that forecasting is only as accurate as a crystal ball?  Who knows what the future will bring?  Use resources other than the textbook.

Forecasting may seem to many like a game of throwing a dart against a board. However, forecasting is method than may businesses and operation use for estimating various future aspects a these estimations are critical to proper management. The success of this management can be closely related to proper forecasts for the business as the predictions are required to prepare with any necessary strategies. According to Forecasting – Inc, “The goal of forecasting is to come as close to possible to an accurate picture of the future. But, as with other forms of future telling, it can never be fully accurate.” (2015). With forecasting, there are multiple variables that can affect this accuracy such as raw material costs, change in demand, or updates to technology. Due to what can be seen as an imprecise nature of forecasting, there are several methods used to bring about the most accurate results. A few mathematical models that can be used include: the Delphi Technique, Time Series, and Cross-Impact Matrix.

The first method listed -- the Delphi Technique -- was developed in the late 1960s by the RAND Corporation. According to Young, “In the Delphi Technique, a group of experts responds to a series of questionnaires. The experts are kept apart and unaware of each other”. (2015). With this technique, the results are compiled from the first questionnaire and then a second questionnaire is presented to experts based off of the results of the first. This method involves questioning, compilation,...