Prognosis is: definition, purposes, types and methods (2023)

In the business world, especially those involved in production. As a basis for decisions, it is very important to predict things that will happen in the future. Forecasting is a process that will help any business because of the many benefits we can derive from it. So, one of them is to pay close attention to supply chain management. In addition, useSupply-Chain-Management-Softwarecan complete transparency and analytics to accurately manage products and materials. Therefore, companies can also make good business forecasts.

In this article we will discuss what forecasts are. What goals can we achieve with forecasts? and what is the method? Check out the discussion below to find the answer.

Definition of prognosis

Forecasting is a process that can predict future events by conducting a study or analysis of past data to find systematic relationships, patterns, and trends. In other words, forecasts themselves are an integral part of any business organization and for all major management decisions.

In future planning, forecasts become the basis for any business. If a company can predict what will happen in the future, it can change its current habits and take a position that will be much more developed in the future.

Purposes and functions of forecasting

Forecasts have several objectives and according to Heizer and Render (2009:47) these are the following:

• To review current and past company policies and see how far the influence will go in the future.

• Forecasting is required because of the time lag between when a company policy is set and when it begins to be implemented.

• Forecasting is the basis of business depreciation in a company to increase the effectiveness of a business plan.

In addition, the forecast has a function to be seen at the time of decision-making. A good decision is based on considering what will happen when the implementation of the decision begins. When the predictions we make are not accurate, the forecasting problem is also a problem that we face again and again "Ginting, 2007".

Factors affecting prognosis

Forecasts have several influencing factors, here is the list:

1. Product nature

The production period of a product is very influential. For example, if a company's product has a long or short time to survive in the market. In addition, the manufacture of the product itself can also influence the prognosis. So you can useE-Procurement-Softwareensure procurement cost efficiency.

2. Distribution method

A company's ability to reach its consumers in the marketplace is one of the factors.

3. The company's position in the market

The company's position in the market also affects the forecast, whether the company is a leader, follower, or niche.

4. Level of Competition.

The position of the company compared to its competitors is also one of the influencing factors in the forecast.

5. Historical Data.

All event data related to the company in the past. To clarify, this is a very important factor. Because this is a reference for companies in the forecast.

types of prognosis

Of course, there are several types of forecasts. The following is an explanation of thesedifferent types:

1. Based on time

First, forecasting methods are based on time. This method is divided into three parts, namely:

• Long-term, namely forecasts that use analysis over a longer period of time, usually last more than two years.

• Medium-term, with a term of three months to two years.

• Short-term, with a term of zero to three months.

2. Based on function

Based on their function, according to Heizer and Render (2009:47), the planning of future operations is divided into three types, namely:

Economic Forecast “Economic Forecast”.

Focus on forecasting inflation rates, availability of funds, funds needed for housing and other planning indicators.

Forecasting technology “technological forecasting”.

Be aware of the level of technological advancement that can bring exciting new products to market that require new plants and equipment.

Demand Forecast "Demand Forecast"

The forecast aims to determine the forecast of demand and market conditions.

3. Based on data availability

The availability of data determines how the forecast can be performed. The types or based on data are as follows:

qualitative method

The company or organization does not have sufficient data for analysis. So the forecast results will also be very subjective as the results of the analysis will vary. For example, from qualitative methods: investigations, interviews, discussions.

Quantitative Methode

Regardless of whether the company or organization has sufficient data, the quantitative method is usually used. Where in the process of analysis using data and numbers approach.

4. Based on the type of agreement

Forecasts based on the type of agreement are divided into two types "Ginting, 2007", namely:

Subjective

based on the feelings or intuition of the person composing it.

objective

based on relevant historical data, using techniques and methods to analyze the data.

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forecast method

As we saw in the previous explanation, there are two types of forecasts based on data availability:

qualitative method

Qualitative methods are used when the organization or company has no historical data. Either because the data isn't viable or doesn't match what you want to predict. Forecasting is mainly based on intuitive thoughts, opinions and knowledge and experience of the compilers. Qualitative is also based on the results of research such as seller opinions, sales manager opinions, expert opinions and consumer surveys.

The following are the most common qualitative methods:

market survey

This method conducts surveys of consumers, interest groups or research of practitioners and even competitors. Also use asurvey appto make your company's surveys easier, more automated and more effective.

Delphi Method

In this method, a group of experts from different backgrounds come together to give opinions in a systematic way.

Personal insight

This personal insight is a simple forecasting method and is no longer used by large companies. In addition, this method is used to discuss or consult references from people who are experienced and experts in their field.

consensus

In the consensus method, participants participate in open discussions. This is the opposite of the Delphi method. As a result of this consensus, the methods are heavily biased. Therefore, many large companies have abandoned this method.

Quantitative Methode

The quantitative methods that companies or organizations use when they have sufficient data. In addition, this method is the analysis process using the data and number approach. The following types of quantitative methods are:

time series method

The time series method is a method that uses an analysis between the variables to be predicted with the time variable.

cause and effect method

This method is based on the relationship between the estimated variables and other variables that affect them. However, the variable does not have the form of time.

Diploma

In summary, this is an explanation of prognosis, from understanding to methods. This knowledge is very important because forecasts allow companies to predict what will happen in the future. Until the company can finally grow. Planning is completely different. It is a process of systematic preparation of activities to be carried out in order to achieve specific goals.

Meanwhile, if you are interested in full transparency and analysis to accurately manage products and materials. Please contactHashMicroto getsupply chain managementsoftware and test the demo now. HashMicro's supply chain management software lets you keep up with fast-moving markets with complete visibility and advanced analytics. This enables you to plan, source, deliver and forecast the right products at the right time.