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• Establishing a New Business: A number of business forecasts are required at the time of starting a new business.
              One has to predict the demand for the product, the caliber of competitors, their share in the market, sources of raising
              finance, etc. Precision in such forecasts is therefore valuable for the success of a business.This will in turn help the
              operations of the business to run smoothly, thereby minimising the chances of any failure.

               • Formulating  Plans:  Forecasting provides a logical basis  for preparing plans. It plays a major role in managerial
              planning and supplies the necessary information. The future assessment of various factors is essential for preparing
              plans. In fact, planning without forecasting is an impossibility. Henry Fayol has rightly observed that the entire plan of
              an enterprise is made up of a series of plans called forecasts.
               • Estimating Financial Needs:  Adequate  capital  is  a  necessity  for  every  business.  Correct  estimates  of  financial
              requirements are there to prevent businesses from suffering from inadequate or excess capital. Forecasting of sales,
              expenses, revenue, etc. helps predict financial needs. Financial planning is based on systematic forecasting.
               • Facilitating Managerial Decisions: It paves the way for sound managerial decisions about personnel, materials, and
              sales, etc., by providing a rational foundation for anticipating and judging the nature of future business operations.

            3.1.4 Disadvantages of Forecasting

            Even the disadvantages can be overcome with the right people, technology and right approach.
               • Forecasts are never 100% accurate: Obviously, it's hard to predict the future. Despite having a great technique in
              place and an expert panel at your disposal, your forecasts might not be accurate. This is primarily because products
              and markets are volatile in nature. Sometimes there is no one specific reason for a surge in demand as many factors
              come into play.
               • It can be time-consuming and resource-intensive: Forecasting calls for a lot of data gathering, data organising, and
              coordination. Companies typically hire a team of demand planners who are in charge of coming up with the forecast.
              But in order to do this well, demand planners need considerable input from the sales and marketing teams. Also, it’s
              not uncommon for processes to be manual and labour-intensive, thus making them time-consuming. But if there is
              the right technology in place, this is much less of an issue.
               • It can also be costly: Employing a team of demand planners is a significant investment. When you add to that
              the  cost  of using cutting-edge  quality  instruments, the  upfront  fees might quickly pile up.  Investing in modern
              technologies,prime talent, and sound forecasting methods, on the other hand, is nothing more than that. If investment
              is done correctly, it will yield positive results.
               • Forecasting can be dangerous: Forecasts become a focus for companies and governments, mentally limiting their
              range of actions by presenting the short-to long-term future as pre-determined.
               • Not every situation can be predicted: This is one of the disadvantages of demand forecasting. For example, severe
              weather could affect  product or material supply accessibility or transportation logistics.

               • Financial Forecasting Inefficiencies and Lack of Data Credibility: From insufficient information to disconnected
              data within the forecast, a number of forecasts have credibility issues. Often the forecasts are unable to tell the true
              story of where the business is going.

            3.1.5 Basic steps in the Forecasting Process

            The forecasting process may involve following five forecasting processes:

            Step 1:  Problem definition
            Step 2:  Gathering information

            Step 3:  Preliminary exploratory analysis

            Step 4:  Choosing and fitting models
            Step 5:  Using and evaluating a forecasting model


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