3.4 Types of Forecasts
Organizations typically use three major types of forecasts for planning their future operations:
- Economic forecasts. Economic forecasts address the overall business cycle and predict economic indicators such as housing starts, inflation rates, money supply, and others. These forecasts help organizations anticipate and plan for broader economic conditions impacting their operations.
- Technological forecasts. Technological forecasts monitor the rates of technological progress and trends. These forecasts enable organizations to stay abreast of emerging technologies that could lead to new products, processes, or services. Anticipating technological advancements allows companies to plan for potential new facilities, equipment, or infrastructure needed to capitalize on those technologies.
- Demand forecasts (or sales forecasts). Demand forecasts, also known as sales forecasts, estimate consumers’ future demand for a company’s products or services. These forecasts drive critical operational planning decisions such as production scheduling, capacity planning, inventory management, financial planning, workforce planning, and marketing strategies (The Art and Science of Forecasting in Operations Management, n.d.).
The sources emphasize that demand/sales forecasts are particularly crucial for operations managers, as they inform decisions related to resource allocation, capacity utilization, supply chain management, and overall operational efficiency to meet the anticipated demand effectively.
While the time horizons may vary (short-term, medium-term, or long-term), these three types of forecasts provide organizations with insights into economic conditions, technological landscapes, and customer demand, enabling them to plan and align their operations accordingly and proactively.
