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Advantages of Forecasting

There are several advantages to forecasting including helping businesses set goals and plans, anticipate market changes, make better decisions, efficiently allocate resources, achieve goals by identifying problems early, accurately estimate costs and revenue to predict performance, help with budgeting, provide insights, and learn from past mistakes. The main types of forecasting methods are time series, econometric, judgmental, Delphi, and combination models. Examples are provided of estimating electricity demand, labor needs, and consumables/spares for various industries using different forecasting techniques.

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Caleb Munyairi
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48 views3 pages

Advantages of Forecasting

There are several advantages to forecasting including helping businesses set goals and plans, anticipate market changes, make better decisions, efficiently allocate resources, achieve goals by identifying problems early, accurately estimate costs and revenue to predict performance, help with budgeting, provide insights, and learn from past mistakes. The main types of forecasting methods are time series, econometric, judgmental, Delphi, and combination models. Examples are provided of estimating electricity demand, labor needs, and consumables/spares for various industries using different forecasting techniques.

Uploaded by

Caleb Munyairi
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
Download as pdf or txt
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Advantages of forecasting

1. Helps set goals and plan


2. Helps anticipate change within the market
3. Helps every business make better business decisions. It helps in overall business planning,
budgeting, and risk management.
4. Allows companies to efficiently allocate resources for future growth and manage its cash
flow.
5. Help teams achieve their goals by identifying early warning signals in their operations
pipeline and course-correct before it’s too late
6. Helps businesses to estimate their costs and revenue accurately based on which they are
able to predict their short-term and long-term performance.
7. Helps budget
8. Helps gain valuable insight into business operations
9. Helps the organisation to learn from past mistakes

There Are Generally Five(5) Types Of Forecasting Methods / Models

A. Time series model.


B. Econometric model.
C. Judgmental forecasting model.
D. The Delphi method.
E. Combination

i. Estimating the demand for electricity in an industrial complex for the next 5 years.

The most common load forecasting models for power system planning are:

 Trend – Time Series model - Trend analysis involves an extrapolation of past growth trends
into the future. It involves fitting a line through past electricity demand and assuming that
future growth will follow a similar trajectory.
 Bottom-up - Bottom-up analysis involves a detailed assessment of the usage of electricity by
different types of consumers and how those consumers will change their consumption habits
in the future and how the consumer mix changes over time.
 Econometric models - An econometric model uses mathematical equations to describe the
relationship between the primary driver (e.g., pruduction throughput, tonnes processed etc
and electricity consumptionz. The mathematical equations in combination with projections
of the external drivers and capacity expansion are then used to forecast future electricity
load
 Hybrid approaches – Combination of any of the above
 DATA
o SIGNIFICAT ENERGY USERS
o Number of machines
o Machine loads
o Tarriffs
o Time of production
o Production volumes e.t.c

ii. Estimating unskilled labour requirements next season for a tobacco processing company.
 The Delphi method - This method is commonly used to forecast trends based on the
information given by a panel of experts.
Each department based on estimated production estimates figures
This series of steps is based on the Delphi method, which is about the Oracle of Delphi
assumes that a group's answers are more useful and unbiased than answers provided by one
individual. The total number of rounds involved may differ depending on the goal of the
company or group's researchers.
 Time Series Model – Seasonal industries such as tobacco processing, cotton processing e.t.c
use this model
 Offseason periods ussually account for maintanance personell and a handful of production
management personnel
 Peak season sees the employment of most employees in the production line
 Data:
o Number of activities,
o Work and motion studies (time studies)
o no. of moving parts,
o production volume estimates
o number of processing ines
o no. of machines e.t.c

iii. Estimating the leach circuit consumables and equipment spares for a gold mining and
processing operation.
 Time series model.
o Mining is ussuallu affected bu flooding
o Rainy seasons means there is less production at shafts
o The amount of onsummables is low and the number of repair and maintanance spares
is high
 Econometric model
o Minimum order quantities spares
o Stock holding capacity
o Leach Circuit recycle stream
o Replenishment rates
 DATA
o Equipment list
o Load Estimate per machine
o Number of pumps
o Number of serviceable parts e.t.c
o stock holding capacity
o Cost of the Spares
o Reorder Levels

CITE EXAMPLES e.g. GOLD , NICKEL, PLATINUM INDUSTRIES

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