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The steps to forecasting are
- Analysing and understanding the problem – The manager must first identify the real problem for which the forecast is to be made. This will help the manager to fix the scope of forecasting.
- Developing sound foundation – The management can develop a sound foundation, for the future after considering available information, experience, type of business, and the rate of development.
- Collecting and analysing data – Data collection is time consuming. Only relevant data must be kept. Many statistical tools can be used to analyse the data.
- Estimating future events – The future events are estimated by using trend analysis. Trend analysis makes provision for some errors.
- Comparing results – The actual results are compared with the estimated results. If the actual results tally with the estimated results, there is nothing to worry. In case of any major difference between the actuals and the estimates, it is necessary to find out the reasons for poor performance.
- Follow up action – The forecasting process can be continuously improved and refined on the basis of past experience. Areas of weaknesses can be improved for the future forecasting. There must be regular feedback on past forecasting.
