Time Series Forecasting
Time series forecasting enables a small business to predict future product demand based on historic demand, assuming that past demand patterns will continue in the future. For example, a graph can be constructed where an “x” represents the number of product units purchased at a particular moment and “y" represents the moment the products were purchased. Weekly, monthly or quarterly data are graphed and a straight line is drawn through the points on the graph to identify a trend, which is then extended to approximate future demand. Companies rely on long-term forecasts to ensure that departments, including purchasing, finance and manufacturing, have sufficient time to respond to the forecasted demand. For example, the finance department might begin negotiations to finance a new plant.