Criteria of a Good Forecasting Method

Sales forecasting is really an art. We have already seen that there are various methods to forecast the sales.

It is course difficult to state which of the methods is best. The suitability of the method depends of nature of manufactured product, available time, wealth and energy, necessary amount of accuracy etc. of an enterprise. However, in general, a good forecasting method possesses the qualifications as below: (1) Accuracy: Various important plants are prepared on the basis of forecasts. In case of wrong forecasting, the business may be in trouble and suffer heavy losses. Hence it is necessary to have such forecasting system which amounts to maximum accuracy. (2) Simplicity: Forecasting method should be as simple as possible. If it is difficult or technical then the person, who is engaged in forecasting job, will not do his job properly and there will be chances always for mistake. Some informations may also require to the be collected from outsiders. If he method is complex or difficult then they may not be able to reply reasonably and accurately. (3) Availability: The objects and scope of forecasting should be as such as the relevant informations are collected immediately with reasonable accuracy. (4) Stability: The data of forecasting must be such wherein the future changes are expected to be minimum and are reliable for planning. (5) Economy: Costs must be weighed against the importance of the forecast to the operations of the business. (6) Utility: The forecasting techniques must be easily understandable and reliable to the management.