Introduction to Management Science (10th Edition)

A forecast is a prediction of what will occur in the future. Meteorologists forecast the weather, sportscasters predict the winners of football games , and managers of business firms attempt to predict how much of their product will be demanded in the future. In fact, managers are constantly trying to predict the future, making decisions in the present that will ensure the continued success of their firms. Often a manager will use judgment, opinion, or past experiences to forecast what will occur in the future. However, a number of mathematical methods are also available to aid managers in making decisions. In this chapter, we present two of the traditional forecasting methods : time series analysis and regression. Although no technique will result in a totally accurate forecast (i.e., it is impossible to predict the future exactly), these forecasting methods can provide reliable guidelines for decision making.