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Forecasting is the process of estimation in unknown situations. Prediction is a similar, but more general term, and usually refers to estimation of time series, cross-sectional or longitudinal data. In more recent years, Forecasting has evolved into the practice of Demand Planning in every day business forecasting for manufacturing companies. The discipline of demand planning, also sometimes referred to as supply chain forecasting, embraces both statistical forecasting and consensus process... Wikipedia does not have an article with this exact name. ... Wiktionary (a portmanteau of wiki and dictionary) is a multilingual, Web-based project to create a free content dictionary, available in over 150 languages. ... Wikipedia does not have an article with this exact name. ... Wiktionary (a portmanteau of wiki and dictionary) is a multilingual, Web-based project to create a free content dictionary, available in over 150 languages. ... Estimation is the calculated approximation of a result which is usable even if input data may be incomplete, uncertain, or noisy. ... A prediction is a statement or claim that a particular event will occur in the future in more certain terms than a forecast. ... In statistics, signal processing, and econometrics, a time series is a sequence of data points, measured typically at successive times, spaced at (often uniform) time intervals. ... Cross-sectional data in statistics and econometrics is a type of one-dimensional data set. ... Longitudinal studies form a class of research methods that involve observations of the same items over a longer time. ...

Forecasting is commonly used in discussion of time-series data.

Categories of forecasting methods

Time series methods

Time series methods use historical data as the basis for estimating future outcomes. In statistics, signal processing, and econometrics, a time series is a sequence of data points, measured typically at successive times, spaced at (often uniform) time intervals. ...

• Moving average
• Exponential smoothing
• Extrapolation
• Linear prediction
• Trend estimation
• Growth curve
• Topi

The term moving average is used in different contexts. ... In statistics, exponential smoothing refers to a particular type of moving average technique applied to time series data, either to produce smoothed data for presentation, or to make forecasts. ... In mathematics, extrapolation is the process of constructing new data points outside a discrete set of known data points. ... Linear prediction is a mathematical operation where future values of a digital signal are estimated as a linear function of previous samples. ... A series of measurements of a process may be treated as a time series, and then trend estimation is the application of statistical techniques to make and justify statements about trends in the data. ... Figure 1: A bi-phasic bacterial growth curve. ...

Causal / econometric methods

Some forecasting methods use the assumption that it is possible to identify the underlying factors that might influence the variable that is being forecasted. For example, sales of umbrellas might be associated with weather conditions. If the causes are understood, projections of the influencing variables can be made and used in the forecast.

• Regression analysis using linear regression or non-linear regression
• Autoregressive moving average (ARMA)
• Autoregressive integrated moving average (ARIMA)

e.g. Box-Jenkins

• Econometrics

In statistics, regression analysis examines the relation of a dependent variable (response variable) to specified independent variables (predictors). ... In statistics, linear regression is a regression method that models the relationship between a dependent variable Y, independent variables Xp, and a random term ε. The model can be written as where β1 is the intercept (constant term), the βis are the respective parameters of independent variables, and p is the... In statistics, nonlinear regression is the problem of fitting a model to multidimensional x,y data, where f is a nonlinear function of x with parameters θ. It is often erroneously thought that the use of least squares to estimate the parameters a, b, c in the model is an instance... In statistics, autoregressive moving average (ARMA) models, sometimes called Box-Jenkins models after George Box and G. M. Jenkins, are typically applied to time series data. ... In statistics, an autoregressive integrated moving average (ARIMA) model is a generalisation of an autoregressive moving average or (ARMA) model. ... In econometrics, the Box-Jenkins methodology, named after the statisticians George Box and Gwilym Jenkins, applies autoregressive integrated moving average ARIMA models to find the best fit of a time series to past values of this time series, in order to make forecasts. ... Econometrics literally means economic measurement. It is a combination of mathematical economics and statistics. ...

Judgemental methods

Judgemental forecasting methods incorporate intuitive judgements, opinions and probability estimates. Probability is the chance that something is likely to happen or be the case. ...

• Composite forecasts
• Surveys
• Delphi method
• Scenario building
• Technology forecasting
• Forecast by analogy

There are several uses of the word survey. ... The Delphi method has been an anticipatory thinking (futures) technique aimed at building an agreement, or consensus about an opinion or view, without necessarily having people meet face to face, such as through surveys, questionnaires, e-mails etc. ... Scenario analysis is a process of analyzing possible future events by considering alternative possible outcomes (scenarios). ... Technology forecasting is predicting the future characteristics of useful technological machines, procedures or techniques. ...

Other methods

• Simulation
• Prediction market
• Probabilistic forecasting and Ensemble forecasting

Look up simulation in Wiktionary, the free dictionary. ... Prediction markets are speculative markets created for the purpose of making predictions. ... Probabilistic forecasting is a technique for weather forecasting which relies on different methods to establish an event occurrence/magnitude probability. ... Ensemble forecasting is a method used by modern operational forecast centers to account for sensitive dependency on initial conditions. ...

Forecasting accuracy

The forecast error is the difference between the forecast value and the actual value for the corresponding period.

where E is the forecast error at period t, Y is the actual value at period t, and F is the forecast for period t.

Measures of aggregate error:

Mean Absolute Error (MAE)
Mean Absolute Percentage Error (MAPE)
Percent Mean Absolute Deviation (PMAD)
Mean squared error (MSE)
Root Mean squared error (RMSE)

Please note that the business forecasters and demand planners in the industry refer to the PMAD as the MAPE, although they compute this volume weighted MAPE. Difference between MAPE and WMAPE is explained in Calculating Demand Forecast Accuracy Mean Absolute Percentage Error (also known as MAPE) is measure of accuracy in a fitted time series value in statistics, specifically trending. ... In statistics the mean squared error of an estimator T of an unobservable parameter θ is i. ... // Understanding customer demand is key to any manufacturer to make and keep sufficient inventory so customer orders can be correctly met. ...

See also

• Forecast error
• Calculating Demand Forecast Accuracy
• Predictability
• Prediction interval, similar to confidence interval

In statistics a forecast error is the difference between the actual/real and the predicted/forecast value of a time series. ... // Understanding customer demand is key to any manufacturer to make and keep sufficient inventory so customer orders can be correctly met. ... Prediction of future events is an ancient human wish. ... In statistics, a prediction interval bears the same relationship to a future observation that a confidence interval bears to an unobservable population parameter. ... In statistics, a confidence interval (CI) for a population parameter is an interval between two numbers with an associated probability p which is generated from a random sample of an underlying population, such that if the sampling was repeated numerous times and the confidence interval recalculated from each sample according...

Application of forecasting

Forecasting has application in many situations:

• Supply chain management
• Weather forecasting and Meteorology
• Transport planning and Transportation forecasting
• Economic forecasting
• Technology forecasting
• Earthquake prediction
• Land use forecasting
• Product forecasting
• Energy forecasting

Supply chain management (SCM) is the process of planning, implementing, and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible. ... Modern weather predictions aid in timely evacuations and potentially save lives and property damage Weather map of Europe, 10 December 1887 Weather forecasting is the application of science and technology to predict the state of the atmosphere for a future time and a given location. ... Satellite image of Hurricane Hugo with a polar low visible at the top of the image. ... Transportation planning is the field involved with the siting of transportation facilities (generally streets and highways and public transport lines). ... Transportation forecasting is the process of estimating the number of vehicles or travelers that will use a specific transportation facility in the future. ... Economic forecasting is the process of making predictions about the economy as a whole or in part. ... Technology forecasting is predicting the future characteristics of useful technological machines, procedures or techniques. ... Seismic hazard map of the San Francisco Bay Area, showing the probability of a major earthquake occurring by 2032 An earthquake prediction is a prediction that an earthquake in a specific magnitude range will occur in a specific region and time window. ... Land use forecasting undertakes to project the distribution and intensity of trip generating activities in the urban area. ... Product forecasting is the science of predicting the degree of success a new product will enjoy in the marketplace. ...

References

• Armstrong, J. Scott (ed.) (2001). Principles of forecasting: a handbook for researchers and practitioners (in English). Norwell, Massachusetts: Kluwer Academic Publishers. ISBN 0-7923-7930-6. 

• Geisser, Seymour (1 June 1993). Predictive Inference: An Introduction (in English). Chapman & Hall, CRC Press. ISBN 0-412-03471-9. 

• Kress, George J.; Snyder, John (30 May 1994). Forecasting and market analysis techniques: a practical approach (in English). Westport, Connecticut, London: Quorum Books. ISBN 0-89930-835-X. 

• Rescher, Nicholas (1998). Predicting the future: An introduction to the theory of forecasting (in English). State University of New York Press. ISBN 0791435539. 

J. Scott Armstrong (born March 26, 1937), Ph. ... The English language is a West Germanic language that originates in England. ... Seymour Geisser (1929 - 2004) was a statistician noted for emphasizing the role of prediction in statistical inference. ... The English language is a West Germanic language that originates in England. ... The English language is a West Germanic language that originates in England. ... Nicholas Rescher (born July 15, 1928 in Hagen, Germany) is an American philosopher, affiliated for many years with the University of Pittsburgh, where he is currently University Professor of Philosophy and Chairman of the Center for Philosophy of Science. ... The English language is a West Germanic language that originates in England. ...

See also

• CPFR
• Prediction
• Calculating Demand Forecast Accuracy
• Predictive Analytics
• Prognosis
• Estimation

Collaborative Planning, Forecasting, and Replenishment (CPFR) is a concept that aims to enhance supply chain links by supporting and assisting joint practices. ... A prediction is a statement or claim that a particular event will occur in the future in more certain terms than a forecast. ... // Understanding customer demand is key to any manufacturer to make and keep sufficient inventory so customer orders can be correctly met. ... Prognosis (older Greek πρόγνωσις, modern Greek πρόγνωση - literally fore-knowing, foreseeing) is a medical term denoting the doctors prediction of how a patients disease will progress, and whether there is chance of recovery. ... Estimation is the calculated approximation of a result which is usable even if input data may be incomplete, uncertain, or noisy. ...

External links

The Institute of Business Forecasting (IBF) is recognized worldwide as the premier provider of forecasting and planning education, training, and certification. This global organization’s membership includes many of the world’s largest and renowned companies; also, it is known for its flagship publication, the Journal of Business Forecasting (JBF). The IBF has helped organizations improve forecasting accuracy and overall performance for over 25 years. For more information, visit www.ibf.org

^[1] The main source of information about forecasting on the internet is the Forecasting Principles site, forecastingprinciples.com. Forecasting Principles summarizes all useful knowledge about forecasting for researchers, practitioners, and educators. It is provided as a public service by the International Institute of Forecasters. The Institute publishes the journals International Journal of Forecasting and Foresight, and organizes International Symposia on Forecasting and forecasting workshops.

• The International Institute of Forecasters
• Forecasting Principles: "Evidence-based forecasting"
• DemandPlanningNet
• Institute of Business Forecasting
• Long-Range Forecasting: "The accumulated wisdom of ages... about forecasting methods"
• Principles of Forecasting Handbook
• http://www.statsoft.com/textbook/sttimser.html
• Applied Forecasting: news on forecasting