This excel video tutorial provides a step by step introduction into the forecast functions that can be used to predict a value of sale orders, population of birds on island or in general the estimated forecast in the future.
In new Excel version you have a handful of functions to help you forecast more accurately before. There are some slight differences in Mac and PC versions and I will cover them as well.
How will you know if you will have to prepare for 5 or 50 customers? If your business needs to produce 150 or 1500 car seats? Or 150 truckloads of ice cream.
Unless you are owner of a crystal ball to predict future events, you need to have a well developed forecast.
Forecast refers to an estimate of what is going to happen and at best forecast is an imprecise science. However, that is the best we have to guide our decisions about inventory, capacity and production levels.
If you forecast demand too high, you will loose resources, and if you forecast too low then you might lose customers and leave them disappointed.
Some of the basic principles of the forecasting that will give you edge when making your model are:
- Keep it simple. If a simple method gives you acceptable accuracy – don’t use complicated
- Predicting sales next month is hard enough, but easier than predicting them on third Wednesday 4 months ahead. Therefore, short-term forecast are more reliable than long term. Future horizon had direct impact on accuracy.
- Be prepared to change forecasting model as demand patterns can change, so you need to measure your forecasting error and adjust to variation. However, don’t overreact to random changes.
- Compare forecasting models and accept that there is no single best method