Why forecast?

To forecast means to predict the values of one or more series over time. For example, you may want to predict the expected demand for a line of products or services in order to allocate resources for manufacturing or distribution. Because planning decisions take time to implement, forecasts are an essential tool in many planning processes.

Methods of modeling time series assume that history repeats itself—if not exactly, then closely enough that by studying the past, you can make better decisions in the future. To predict sales for next year, for example, you would probably start by looking at this year's sales and work backward to figure out what trends or patterns, if any, have developed in recent years. But patterns can be difficult to gauge. If your sales increase several weeks in a row, for example, is this part of a seasonal cycle or the beginning of a long-term trend?

Using statistical modeling techniques, you can analyze the patterns in your past data and project those patterns to determine a range within which future values of the series are likely to fall. The result is more accurate forecasts on which to base your decisions.