ELEMENTS OF THE FORECASTING PROCESS

J.W. Redfield describes the following elements of forecasting process: 

1. Prepare the groundwork.

2. Establishing future business.

3. comparing actual with estimated results.

4. Refining the forecasts. 

  • Prepare the Groundwork

The group work preparation requires a thorough study, investigation, and analysis of the company, its products, its market share, its organizational structure and the industry. The investigation will involve the past performance of all these factors, their growth over a period of time and the extent of their inter-relationships and interdependence. The aim is to build a foundation on which future estimates can be based. 

  • Establishing Future Business

The future expectancy of the business can be reasonably computed from the past data as well as the input from the key executives of the organization, sales personnel and other specialists. This forecast is developed with the participation of the key personnel and is officially communicated to ail. Thus all these people assume responsibility for meeting these forecasts and accountability for any deviations from this forecast. 

  • Comparing Actual with Estimated Results

The forecast estimates over the future years provide benchmarks against which the actual growth and results can be measured and compared. If there are significant variations between the two, one way or another, the reasons for such deviations can be investigated and analyzed. 

  • Refining the Forecasts

In the light of any deviations found, the forecast can be refined to be more realistic. lf some conditions have changed during the periodic evaluation, then the new values of the variables can be incorporated in the estimates. Thus, these constant revisions and refinements and improvements would add to the experience and skill in forecasting, since proficiency in forecasting can only be gained through practice and expenses.

The above elements indicate a systematic approach to the problem of forecasting. As a materiality, these elements are found in any research procedure.