FORECASTING

MAY 26, CEBU CITY

Objectives
To be able to understand the IMPORTANCE OF FORECASTING in planning and target setting.

To be able to distinguish between PROJECTING and TARGETING.

To be able to demonstrate the basic methods of QUANTITATIVE FORECASTING.

Projection and Targeting

Projection
l

Is the process of making an intelligent guess

about the future situation given past and
present trends

l
l

Projection (Projecting) is synonymous with

Forecasting

l
l

Projection differs from targeting as

projection is the basis for targeting

Targeting
l

Is the intended future condition or

result given planned inputs and
activities

The basis for targeting is projection

GROWTH

Projection VS Targeting

Start

End

Projection VS Targeting

GROWTH

Projection

Start

End

Projection VS Targeting
Target

GROWTH

Projection

Start

End

Misconception
Target
B

GROWTH

C
A

Start

End

Projection

Types of Forecasting
Quantitative

Qualitative

Forecasting Methods (Quantitative)

Arithmetic Mean Method (AMM)

Arithmetic Straight Line (ASL)

Arithmetic Geometric Curve (AGC)
Statistical Straight Line (SSL)

Arithmetic Mean Method (AMM)

AMM Forecasts uses the arithmetic mean as the forecast value

AMM Formula:

Where:
y = sample

n = number of samples

Arithmetic Mean Method (AMM)

Net Enrollment Rate
School Year
Actual Data Forecast Data
2009-2010
72.29%
84.81%
2010-2011
72.97%
84.81%
2011-2012
89.97%
84.81%
2012-2013
96.05%
84.81%
2013-2014
92.74%
84.81%
2014-2015
84.81%
2015-2016
84.81%
2016-2017
84.81%

Total ( )
424.03%
n
5
Arithmetic Mean 84.81%

Procedures to make the graph

1st Highlight School Year, Actual Data and Forecast

Continuation. . .
2nd Go to Insert tab. Go to
Chart subgroup and click Line
graph

VOILA!

Illustration
Net Enrollment Rate
100%

95%

90%

85%

80%

75%

70%
2009-2010

2010-2011

2011-2012

2012-2013

2013-2014

School Year
Actual Data

Forecast Data

2014-2015

2015-2016

2016-2017

Arithmetic Straight Line (ASL)

ASL follows the basic notion that two (2) points will make up a line

ASL Forecast uses the average (mean) increase or decrease in the value of the variable under
consideration
ASL Formula:

=
Where:
+1 = 2nd point

= 1st point
n = number of samples

1(
+1 )
1

(2 1 )+(3 2 )+(+1 )
1

Computation
School Year
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017

Actual Data
0.722922111525
0.72967330711875
0.89970205848125
0.9605329321625
0.9274215416

Difference
=C5-C4
=C6-C5
=C7-C6
=C8-C7

Computation
Forecast Data
0.722922111525
=F4+$I$6
=F5+$I$6
=F6+$I$6
=F7+$I$6
=F8+$I$6
=F9+$I$6
=F10+$I$6

Total
n-1
Increment

=SUM(D5:D8)
4
=I4/I5

Arithmetic Straight Line (ASL)

Y1
Y2
Y3
Y4
Y5

Net Enrollment Rate

School Year
Actual Data Difference
2009-2010
72.29%
2010-2011
72.97%
0.68%
2011-2012
89.97%
17.00%
2012-2013
96.05%
6.08%
2013-2014
92.74%
-3.31%
2014-2015
2015-2016
2016-2017

Y2 - Y1
Y3 - Y2
Y4 - Y3
Y5 - Y4

Forecast Data
72.29%
77.40%
82.52%
87.63%
92.74%
97.85%
102.97%
108.08%

Total
20.45%
n
4
Increment 5.11%

Procedures to make the graph

1st Highlight School Year and Actual Data.

Continuation. . .
2nd Go to Insert tab. Go to
Chart subgroup and click Line
chart.

Continuation. . .
3rd To add Forecast data, right click the generated Line chart then click Select Data.

Continuation. . .
4th A window will appear. Click Add

Continuation. . .
5th A window will appear. Click
worksheet and press Enter.

in the Series name and click to Forecast Data on the

Continuation. . .

Continuation. . .
6th On the Series values, click
Enter and click Ok.

and highlight all the data from the Forecast Data, then press

Continuation. . .
7th Click Ok to generate graph.

VOILA!

Illustration
Net Enrollment Rate
105%
100%
95%
90%
85%
80%
75%
70%
2009-2010

2010-2011

2011-2012

2012-2013

2013-2014

School Year
Actual Data

Forecast Data

2014-2015

2015-2016

2016-2017

Arithmetic Geometric Curve (AGC)

AGC uses the growth rate formula as basis for forecasting. This is the reason why AGC is also
known as Growth Rate Method.
Growth Rate formula:

=
Where:
+1 = 2nd point

= 1st point
n = number of samples

1(
+1 )
1

(2 1 ) (3 2 )
(
)
+
+ +1
1
2

Computation
School Year
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017

Actual Data
0.722922111525
0.72967330711875
0.89970205848125
0.9605329321625
0.9274215416

Difference

Growth Rate

=C5-C4
=C6-C5
=C7-C6
=C8-C7

=D5/C4
=D6/C5
=D7/C6
=D8/C7

Computation
Forecast Data
=C4
=G4*(1+0.0689)
=G5*(1+0.0689)
=G6*(1+0.0689)
=G7*(1+0.0689)
=G8*(1+0.0689)
=G9*(1+0.0689)
=G10*(1+0.0689)

Total
=SUM(E5:E8)
n
4
Average Growth Rate =J4/J5

Arithmetic Geometric Curve (AGC)

Y1
Y2
Y3
Y4
Y5

Net Enrollment Rate

School Year
Actual Data Difference Growth Rate
2009-2010
72.29%
2010-2011
72.97%
0.68%
0.93%
2011-2012
89.97%
17.00%
23.30%
2012-2013
96.05%
6.08%
6.76%
2013-2014
92.74%
-3.31%
-3.45%
2014-2015
2015-2016
2016-2017

(Y2 - Y1)/Y1
(Y3 - Y2)/Y2
(Y4 - Y3)/Y3
(Y5 - Y4)/Y4

Forecast Data
72.29%
76.28%
80.48%
84.91%
89.59%
94.53%
99.74%
105.23%

Total
n
Average Growth Rate

27.55%
5
5.51%

VOILA!

Illustration
Net Enrollment Rate
120.00%
115.00%
110.00%
105.00%
100.00%
95.00%
90.00%
85.00%
80.00%
75.00%
70.00%
2009-2010

2010-2011

2011-2012

2012-2013

2013-2014

School Year
Actual Data

Forecast Data

2014-2015

2015-2016

2016-2017

Statistical Straight Line (SSL)

Equation of a Straight Line

The Equation of a Straight Line is given as:

= +
Where:
y = Dependent variable
a = Intercept
b = Slope
x = Independent variable

Statistical Straight Line (SSL)

Equation of a Straight Line

Slope formula is:

Where:
=
=
= Mean of Y
= Mean of X

Intercept formula is:

=

Steps for SSL

IF no Analysis ToolPak was not yet installed, please follow the following steps

1st Go to File > Options > Add-ins

Continuation. . .
2nd Click dropdown list named Manage
and choose Excel Add-ins and click Go

Continuation. . .
3rd A window will appear. Check Analysis
ToolPak then click Ok

The data set

SSL Procedure proper

1st Go to Data menu and under Analysis subgroup, click Data Analysis.

Continuation. . .
2nd A window will pop out. Click Regression, then press OK

Continuation. . .
3rd Another window will pop out. In Input Y Range, Click
press Enter.

and highlight Actual data then

Continuation. . .
4th In Input X Range, Click
data, highlight up to 5).

and highlight X up to where the actual data ends (as to our

Continuation. . .
5th Click the dot at Output Range then

to choose where the output will be generated.

Continuation. . .
5th Click Ok to generate analysis.

Generated output
SUMMARY OUTPUT
Regression Statistics
Multiple R
0.893442622
R Square
0.798239718
Adjusted R Square 0.730986291
Standard Error
0.058731958
Observations
5

FOCUS HERE!

ANOVA
df
Regression
Residual
Total

Intercept
X Variable 1

y = 0.656 + 0.064X

1
3
4

SS
MS
F
Significance F
0.040941888 0.040941888 11.86913 0.041081182
0.010348329 0.003449443
0.051290217

Coefficients Standard Error

t Stat
P-value
0.656092845
0.061598597 10.65110047 0.001769
0.063985849
0.018572676 3.445160475 0.041081

Lower 95%
Upper 95% Lower 95.0% Upper 95.0%
0.460058617 0.852127072 0.460058617 0.852127072
0.004879305 0.123092392 0.004879305 0.123092392

Summary
Identifying a and b and the SSL equation of the line.

a
b

Coefficients
Intercept 0.656092845
X Variable 10.063985849

y = a + bx
y = 0.656 + 0.064x

Computation
School Year
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017

Actual Data
0.722922111525
0.72967330711875
0.89970205848125
0.9605329321625
0.9274215416

X
1
2
3
4
5
6
7
8

Forecast
=0.65609+0.06399*C3
=0.65609+0.06399*C4
=0.65609+0.06399*C5
=0.65609+0.06399*C6
=0.65609+0.06399*C7
=0.65609+0.06399*C8
=0.65609+0.06399*C9
=0.65609+0.06399*C10

a
b

0.656092844619375
0.063985848519375

Continuation. . .

VOILA!

Illustration
Net Enrollment Rate
120%
115%
110%
105%
100%
95%
90%
85%
80%
75%
70%
2009-2010

2010-2011

2011-2012

2012-2013
Actual Data

2013-2014
Forecast

2014-2015

2015-2016

2016-2017

Assessing Optimality of Method

Mean Absolute Difference (MAD)
MAD is a measure of forecast error and is indicative of how good is the forecasting method given the
historical data
MAD Formula is:

Where:
= actual data

= forecast data
= number of samples

+ + +

Computation
School Year
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014

Actual Data
0.722922111525
0.72967330711875
0.89970205848125
0.9605329321625
0.9274215416

Forecast
0.72007869313875
0.784064541658125
0.8480503901775
0.912036238696875
0.97602208721625
MAD

Difference
=ABS(B17-C17)
=ABS(B18-C18)
=ABS(B19-C19)
=ABS(B20-C20)
=ABS(B21-C21)
=AVERAGE(D17:D21)

Mean Absolute Difference (MAD)

AMM
School Year
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
AGC
School Year
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014

Actual Data Forecast Data Difference

72.29%
84.81% 12.51%
72.97%
84.81% 11.84%
89.97%
84.81%
5.17%
96.05%
84.81% 11.25%
92.74%
84.81%
7.94%
MAD
9.74%
Actual Data Forecast Data Difference
72.29%
72.29%
72.97%
77.27%
4.31%
89.97%
82.60%
7.37%
96.05%
88.29%
7.77%
92.74%
94.37%
1.63%
MAD
5.27%

ASL
School Year
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014

SSL
School Year
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014

Actual Data Forecast Data Difference

72.29%
72.29%
72.97%
77.40%
4.44%
89.97%
82.52%
7.45%
96.05%
87.63%
8.42%
92.74%
92.74%
0.00%
MAD
5.08%

Actual Data Forecast Difference

72.29% 72.01%
0.28%
72.97% 78.41%
5.44%
89.97% 84.81%
5.17%
96.05% 91.20%OPTIMAL
4.85%
MODEL!!!!
92.74% 97.60%
4.86%
MAD
4.12%

Targeting
Types of Targeting

Top-Down Targeting
Bottom-Up Targeting
Objective-Based Targeting

Top-Down Targeting
Top-Down Targeting is targeting undertaken first by top management and is subsequently
apportioned to the field operating units

Bottom-Up Targeting
Bottoms-up Targeting is targeting undertaken by first gathering all the inputs from the field
operating units and aggregating them into consolidated total

Illustration

Objectives-Based Targeting
Objectives-Based Targeting is targeting based on the desired or planned objectives.

The desired objective can be based problems, needs, potential problems and opportunities

Market-based Targeting or Market-share Targeting is a form of Objectives-Based Targeting

THINGS TO REMEMBER!

APPRORIATENESS
Differentiate
between what we
need to know vs
what is nice to
know
Only collect/use
data that you will
use that is
relevant.

RISK OF BIAS

Bias is can happen when

the experience,
perceptions and
assumptions of the
researcher influence the
data collection or analysis,
or if the tools and
approaches used for
measurement and analysis
are not reliable.

Avoid bias to ensure

accuracy and reliability of
your tools.

ACCURACY AND
PRECISION
Ensure that the
question or tool
asks what you
are wanting to
find out
(accurate)

ATTRIBUTING
CAUSALITY