Forecasting is a decision-making tool used by many businesses to help in budgeting, planning, and estimating future growth. Moreover planning and controlling logistics systems need predictions for the level of future economic activities because of the time lag in matching supply to demand. In the simplest terms, forecasting is the attempt to predict future outcomes based on past events and management insight. (Steven Bragg, What is forecasting, 2018).
Is the income extent at which the total income is equal to the complete cost that is, at this factor the establishment does no longer make an earnings or loss and consequently any stage of manufacturing under the break-even factor of the institution with the loss of increasing distance from this point. On the different hand, any degree of manufacturing that exceeds the break-even point is finished by the establishment with make bigger in distance. That is, if total revenue covered the total fees except leaving a surplus to profit, this level of undertaking is known as a break-even point. Is the point at which price or expenditure and revenue are equal: there is no attain or internet loss and one has a “broken even”. No profit or loss is offered, even though the possibility charges have been paid, the capital receives adjusted risk, and the predicted return Steps to be observed to attain a factor equal to the financial unit in light of the multiplicity of products. (Allay 2005).
A break-even point defined as the point at which total revenue equals total costs, and then the profit is zero. If an entity’s sales exceed that point, it generates profits, and if it does not reach it, it loses. A break-even point can be defined as the point at which the return or margin of the contribution is equal to the fixed costs for the period (Canada, 2012).
Method of equations:
Sales that are equal in size and value are calculated on the assumption that the entity produces and sells one product using the following equations:
First: Determine the size of the tie:
The amount of sales tie = fixed costs divided by the return of the unit
Where the return of the contribution = unit sale price subtracts the variable cost of the unit.
A tie is the point where the project or organization does not achieve profit or loss, so that the expenses are equal to the revenue
The equation is as follows
Sales at break-even = fixed costs + variable costs
The break-even point is mathematically determined as follows: Breakout point = Total Fixed Costs / (1- Total Variable Costs / Total Sales).
Support the organization to make sales decisions:
Decision-making is at the heart of the administrative process, as it is an overlapping process in all management functions and activities. When management exercises the planning function, it makes specific decisions at each stage of the plan, Policies, program development, identification of appropriate resources or selection of the best methods and methods for their operation. When the Director takes his leadership, he takes a series of decisions, both when directing subordinates and coordination They are also making decisions on determining the appropriate criteria for measuring the results of the work, the adjustments to be made to the plan, and working to correct the errors if any. Thus, the decision-making currency takes place in a cycle continuing with the continuation of the administrative process itself the administrative decision is a legal or systematic act and a means of management to achieve its objectives and objectives where the administrative decision plays a major role in the field of administrative process. The decision is the one who believes in the human resources and the material means necessary for the administrative process. It is the decision that crystallizes trends and policies to concrete matters. And the warp in the course of that process, it also clarifies the obligations and reveals the rights and importance of the era of the issuance to the higher levels of the administrative pyramid where the process of issuance or decision-making of the basic functions of ministers and directors and so on, and this work Which ensures the organizational character of the decision, although issued on behalf of one of the officials, but it is the result of the combined efforts (Michelle, 2009).
Advantages of Forecasting:
1. It Increases customer satisfaction because after predicting product demand customer orders will be fulfilled in a shorter time.
2. It will reduce inventory stock outs by only providing what approximately customers demand.
3. It will reduce product obsolescence costs because when removing obsolete inventory the volume of inventory on hand will decrease. With this, both direct and indirect costs of keeping the obsolete inventory will be reduced.
4. Improving pricing and promotion management by integrating distributor-level promotions and related forecasts will allow improving the flow of goods and achieving better results in terms of availability and stock fill rates.
5. With accurate sales forecasting, a higher rate of on time in full, or OTIF, delivery can be achieved.
6. Continuous improvement can be achieved when forecasting sales and continually revising the process to improve the accuracy.
Disadvantages of Forecasting:
1. It is not possible to accurately forecast the future. Any unforeseen factors can render a forecast useless
2. The longer the forecasting period, the less accurate the forecast will be.
3. A bad forecast can result in financial ruin for the organization, so an organization should never base decisions solely on a forecast.
4. Unpredictable revenue, revenue based on sales forecasts is only moderately predictable.
5. Unexpected occurrences because nothing is certain.
6. Invalid expert opinions
Issues of Forecasting:
1. Some forecasting methods may use the same data but deliver widely different forecasts. For example, one forecasting method can show that interest rates will rise, while another will illustrate that rates will hold steady or decline.
2. All qualitative forecasts assume that certain market characteristics that existed in the past will exist in the future. Unfortunately, during each operating period, the market can be positively or negatively affected by unexpected occurrences, such as weather events, changes in tax code and changes in competitors’ products and services
3. In times of political and economic uncertainty, historical data may be obsolete, although current data may not be available. In such cases, in developing a forecast, a small business may rely on the opinions of company leaders, if the opinion of one person, whose view prevails, is incorrect, the forecast is incorrect.
4. The longer the forecasting period, the less accurate the forecast will be.
5. Sales people, who tend to be optimists, will likely develop a forecast that is overly optimistic.
6. Building a sales forecast with any level of accuracy is incredible intensive