Forecasting with Indices Qrb501

Forecasting with Indices

Someone once said, “Forecasting is very difficult, especially if it's about the future” (anonymous, 2010). This statement stands true because forecasting is in fact difficult at times, especially since all forecasting is done to predict future trends. Forecasting is a tool that is very important in day to day business. The American Heritage Dictionary defines forecasting as, “To estimate or calculate in advance, especially to predict by analysis of meteorological data” (n.d.). Forecasting allows businesses to plan appropriately when dealing with production, as well as many other areas of business, such as sales and procurement. Indices are used to help keep numbers relative and in context. The assignment at hand dealt with both of these concepts. This assignment may be viewed by clicking on the attached Excel spreadsheet, entitled Inventory Index – Week 3.

Four years worth of data was provided by the University of Phoenix on the student web page (University of Phoenix, n.d.). This data was then exported into Microsoft Excel. When working with any type of data or numbers, it is often much easier to perform analysis and functions through this program. Excel allows the user to write formulas and to organize data in many different ways. Once the University of Phoenix material: Summer Historical Inventory Data” was placed into Excel, the author of this paper added “Index” columns after years two, three, and four. Year five was the year to be forecasted for, and by finding the indices for each month, the author was able to determine the actual number of units forecasted for each month in year five. The index for each year was found by taking that year’s data divided by the first, or base year’s data. Because there are twelve months in the year, and data listed for each month, indices were found for each month. Year two’s indices were found by taking the number of units in each month of year two and dividing that number by...