Friday, January 13, 2017

Medium-term forecasting

A forecast is a prediction of some event or events. Forecasting is an important problem that spans many field including business and industry, government, economics, environmental sciences, medicine, social science, politics and finance. An organization uses forecasting as a starting point to the annual business planning exercise. This typically constitutes medium term forecasting.

In medium-term forecasting, the planning horizon is usually 12-18 months. During this period, some aggregation of data is done.

For example, of an organization offers 15 variations of a product, the demand for the product is estimated at an aggregate level. To handle seasonality in demand across a time period form 6 months to 1 year, medium-term forecast is used to build up seasonal inventory, budgeting and work force planning.

It allows a firm to have a horizon of 6-12 months for managing resource planning and budgeting.

In budgeting, medium-term forecasting is used to project gaps between anticipate revenues and expenditures during the next one to five years. This prompts policy discussion and hopefully decisions to close these gaps.
Medium-term forecasting
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