Forecasting
The future belongs to those who change it. But what if you knew now how your actions today will affect the results of tomorrow? Business forecasting makes exactly that possible. On this page, we take a look into the future together with you. Read on to find out:
- how you can also introduce targeted forecasting in your company
- Which forecasting methods you should use to steer your company towards a successful future
- The mistakes you should avoid at all costs when forecasting so that you benefit from meaningful forecasts
What is forecasting?
Forecasting is by definition the art of predicting future events or developments on the basis of historical data and trends.
This makes it possible to precisely forecast how today's actions and decisions will affect the future. Forecasting is not only used as a controlling tool in the economic and financial sector, but also has a firm place in areas such as politics and meteorology. Here is a brief overview:
Application areas of forecasting
- Economy and finance: Market forecasts, share price forecasts, liquidity planning
- Weather and climate research: Precise weather forecasts and long-term climate predictions
- Energy supply: Planning energy demand and production
- Public sector: traffic forecasts and resource allocation
- Healthcare: Demand planning and capacity management
- Supply chain management: Optimization of supply chains including inventory planning
Prescriptive Analytics eröffnet Unternehmen völlig neue Möglichkeiten, datenbasierte Strategien umzusetzen. Durch die Kombination von Vorhersagemodellen und Handlungsempfehlungen liefert diese Methode konkrete Ansätze, um Geschäftsentscheidungen effizienter und erfolgreicher zu gestalten.Â
Business forecasting for precise predictions
If you want to set realistic targets for your company, prevent risks or positively influence future results, you should rely on business forecasting. After all, if you can make precise forecasts, you are in a position to do so:
- optimize your own sales and demand planning
- to set up seamless production planning
- align its personnel requirements planning with the demands of the future
- get the most out of budgeting and cost control
Our technologies
nedyx®
nedyx® is a low-code platform that enables business apps without programming knowledge. With a drag-and-drop interface and Office-like operation, it offers individual dashboards, chatbots and cloud integration. nedyx® supports flexible planning, operational control and adapts to different business requirements.
Longview Analytics
Longview Analytics is a platform for reporting and planning systems that integrates real-time information from data sources. It offers ad hoc queries, self-service analytics and customized reports. With an intuitive interface and integration with Excel, it is scalable and secure, ideal for data-driven decisions.
Microsoft Fabric
Microsoft Fabric is an integrated data platform that supports companies in analyzing and using their data. It enables centralized data management, fast analysis and informed decision-making. With functions for real-time analysis and AI-supported insights, Fabric optimizes the data strategy and increases efficiency.
Your contact person
Do you have questions about the technologies or would you like to discuss your use case? Our expert Adrian Liebetrau has many years of experience in digitization projects and will be happy to talk to you without obligation.
Contact us nowWhat forecasting methods are there?
Forecasting is no longer in its infancy and has a long history dating back to antiquity. Accordingly, various approaches have developed over time, the most important of which we would like to present to you here:
Quantitative forecasting methods
Quantitative forecasting methods are characterized by an objective, data-driven approach. They are particularly useful when a large amount of historical data is available. The focus is 100% on hard facts and figures. The most important quantitative forecasting models include the following approaches: - Time series analysis: Forecasts are based on historical data. This includes moving averages and ARIMA models, which reveal trends and seasonal effects.
- Regression analysis: In regression analysis, the relationships between variables are estimated in order to predict future developments.
- Causal models: These prediction models are based on the assumption that certain events or factors have a direct effect on what is to be predicted.
- Exponential smoothing: Although all relevant data is included in the calculation, more recent data is weighted more heavily than older data, which should improve the accuracy of the prediction.
Qualitative forecasting methods
In contrast to quantitative forecasting methods, quantitative forecasting is mainly based on "soft" data, i.e. non-numerical, subjective information such as expert opinions, surveys, interviews or focus groups, in order to obtain estimates. The use of qualitative forecasting methods is particularly recommended when there are not yet enough hard facts and figures available for quantitative forecasting, i.e. when new phenomena and developments and their effects are to be researched. You can use the following models for this purpose:- Delphi method: Expert interviews are conducted in several rounds. The whole process continues until a consensus is reached.
- Scenario technique: A group of experts and managers develop a series of possible future scenarios in order to prepare for the best-case and worst-case scenarios.
- Market research: Traditional market research is also part of qualitative forecasting. Depending on the objective, experts or laypersons are interviewed on a topic in order to obtain a realistic assessment of future developments.
Modern forecasting approaches
Thanks to modern technologies, a number of new forecasting approaches (predictive forecasting) have emerged in recent years that enable even more accurate forecasts. Big data analytics can be used to analyze large volumes of data and tap into unstructured data sources, making detailed forecasts possible.The area of Machine Learning & AI (Forecasting Machine Learning & AI) also plays an important role here, with complex algorithms revealing small-scale patterns that would otherwise have remained hidden.
Structural approaches
In addition to the various methods, the structural approach also plays an important role. We distinguish here between 3 different approaches:
- Top-down forecasting: start at a high level (company, market), break down to smaller units
- Bottom-up forecasting: start at detailed level (departments, products), aggregation to overall forecast
- Countercurrent method: Combination of top-down and bottom-up to reconcile forecasts at different levels
In close consultation with our customers, we usually recommend the counter-current method for customer projects. The reason: both perspectives (bottom-up and top-down) are included from the outset, which counteracts a one-dimensional and distorted approach.
Combined forecasting methods
Experience shows: In practice, our customers usually achieve the best results when different forecasting approaches are combined.
A so-called hybrid model can look like this, for example, where you analyze sales data for similar products using a time series model. At the same time, a regression model is used to classify the influence of possible variables such as price changes or marketing campaigns.
In addition, you could refine the results with a qualitative approach and, for example, conduct an expert survey to assess future trends and emerging customer preferences in forecasting.
In order to determine the right forecasting methods for the individual situation, comprehensive technological and methodological know-how is required. We will be happy to work with you to find the right mix for your company in a free consultation.
When does it make sense to use forecasting in your own company?
Forecasting is of particular interest to you if one or more of the following points apply to your situation:
- You are in a growth and expansion phase: forecasting can help you to open up new markets, develop new products and catapult your demand to peak levels
- You operate in a volatile, uncertain market: if strong market fluctuations or uncertainties are constantly shaking up your business, an in-depth forecasting analysis can provide the necessary planning security.
- Scarce resources are a problem for you: In this case, forecasting will help you to plan your stocks more precisely and use your resources more effectively.
- Strong cost and budget pressure limits your options: With the help of forecasting, you will be able to plan budgets 100% in line with demand and significantly minimize financial risks in the long term.
- You want to make long-term strategic plans for the future: by introducing a forecasting system, you will be able to set ambitious company targets and achieve them.
- You operate in international markets with complex supply chains: Forecasting relieves you of the burden of global coordination, helps you to make precise demand forecasts and proactively supports you in risk management.
- You want to adapt to technological developments: With well thought-out forecasting, you are always in tune with the times, identify technology trends at an early stage and are able to integrate innovations into your company before your competitors.
Forecasting vs. budgeting - how are the two terms related?
Forecasting and budgeting are two essential tools for corporate planning, but they fulfill different purposes and functions.
Forecasting is a dynamic process based on historical data and trends. It helps companies to prepare for upcoming changes by providing regularly updated and short-term forecasts.
In contrast, budgeting is a static process that creates fixed, long-term financial plans for a specific period (usually one year). While forecasting is continuously reviewed and adapted to new information, budgeting pursues long-term, fixed goals and resource allocations that are less flexible.
Forecasting makes it possible to adapt to changing conditions, whereas budgeting is primarily used to plan and control expenditure and income. While forecasting is an ongoing process that is regularly updated, budgeting takes place at fixed time intervals.
All in all, however, the two tools complement each other very well. Forecasting supports budgeting by deriving future trends and results on the basis of historical facts, figures and developments - thus providing high-precision data for budget planning.
5 valuable benefits of forecasting that you should have on your radar:
- Improved planning and decision-making: With a functioning forecasting system, more precise preparation for future developments and strategic decisions is possible.
- More efficient use of resources: With the help of forecasting, you can derive specific recommendations for action from complex data and figures. This enables you to plan personnel, capital and materials in line with requirements and effectively counteract over- and understocking.
- Reliable risk management: In-depth forecasting identifies a wide range of risks and threat scenarios at an early stage. This allows you to develop suitable emergency plans in good time and thus avert damage to your company.
- Sustainable cost savings: Reduce your costs by revealing unnecessary expenses through proactive forecasting - and plan your budgets taking into account upcoming market trends and developments.
- Tangible competitive advantage: With effective forecasting, you can identify the significance of certain market trends at an early stage and gain a deep understanding of your customers' needs. This gives you the opportunity to make adjustments ahead of your competitors that have a positive impact on sales and turnover figures.
You should avoid these 4 common mistakes
avoid when forecasting:
- Mistake #1: Forecasting exclusively in Excel: Excel has its strengths when it comes to data input and output. However, it is unsuitable as a pure forecasting tool, as it does not offer integrated workflow control and therefore results in non-transparent processes. Added to this is the immense manual effort and the high susceptibility to errors.
- Mistake #2: Using an inferior database: Faulty or missing data makes for unreliable future predictions - which in turn result in wrong decisions that can harm your business in the long run.
- Mistake #3: Not setting clear goals: Even the most in-depth forecasting system will not give you any advantages if it is not clearly defined from the outset what you are putting all your effort into.
- Mistake #4: Excessive complexity: Even if getting started with forecasting is an important next step for your company, don't expect too much of yourself and your teams at the beginning. A high level of complexity not only increases the error rate, but is also likely to reduce acceptance among your employees.
5 professional tips to help you get started with forecasting
- Ensure high data quality to guarantee reliable forecasts
- Define clear goals to make the success of your measures measurable - and to be able to make adjustments if necessary
- Work with the right forecasting methods to maximize the probability of occurrence of your predictions
- Monitor and update your forecasts continuously to include short-term trends in your predictions
- Use modern forecasting tools, forecasting dashboards and forecasting software to reduce manual effort and minimize sources of error
At Partake, we know all the best practices from practical experience. We are therefore able to recommend suitable forecasting models, support you with data visualization and, if required, tailor suitable forecasting software to your needs. We are also happy to help you link your forecasting with existing tools such as SAP, PowerBI, nedyx or Oracle.
Book your free consultation and we will show you how to make precise forecasts for the future of your company with minimal effort.
Forecasting in business: the success driver of tomorrow
In a time characterized by economic uncertainty and constantly changing markets, you need to make the best possible strategic and operational preparations for the future - ideally with a high degree of precision and at a manageable cost.
Precise forecasting helps you to make well-founded decisions, minimize risks and make better use of short-term opportunities.
That is why we are making our own forecast at this point: In the coming years, more and more small and large companies will get into forecasting because they recognize the great potential for their own corporate planning.
Would you like to get a head start? Then arrange a free consultation with our forecasting experts today to develop effective strategies for a successful future tomorrow.
Arrange a meeting
Select the desired date and arrange a non-binding and free initial consultation with Dieter Höfer (Partner & Sales Director). We will be happy to answer your questions and discuss solutions for your individual requirements.