7 analysis and models of Quantitative forecasting techniques:
These techniques use statistical analysis and other mathematical models to predict future events, primarily based upon past activities. They are as follows:
(a) Time series analysis:
This analysis is based on the assumption that activities are good indication of future activities. The past trends are extended into the future barring any unforeseen circumstances. These techniques are fairly sophisticated and require experts to use these methods. This method is quite accurate where future is expected to be similar to past.
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(b) Causal models:
These models are more complex in nature and involve interrelationships of many variables tied together in a quantitative model. These models are primarily used to predict economic trends and are based on a multitude of factors, probabilities and assumptions. No matter what model or method is used, forecasting basically rests on human judgment. Even the most sophisticated models have to be interpreted by humans.
(c) Break even analysis:
Break-even analysis is also a very important quantitative forecasting tool. It is a composite of various elements like total revenue, fixed cost, variable cost and total cost.
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(d) Budget:
Budget also helps to forecast things. It is through budget, and organisation can give expression to the plan in terms of costs and revenues.
(e) Scheduling:
It is part of an action plan and it is a process of establishing a time sequence for the work to be done.
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(f) Inventory:
A technique that is in vogue is economic order quantity (EC Q). Its object is to ensure maintenance of an adequate inventory on hand at the lowest total cost to the organisation.
(g) Linear Programming:
Linear Programmes are also used for forecasting. Linear programming is the optimization of an outcome based on some set of constraints using a linear mathematical model.