(upbeat music) Forecasting is the process of estimating future demand. Also known as projection or prediction. It is an anticipation of future needs. Forecasting is vital to enabling businesses to make decisions regarding resources in the short, medium and long-term. Short-term forecasting typically looks weeks to months into the future and involves decisions impacted by the numbers in the master production schedule, also known as the M P S. While the M P S specifically refers to a manufacturing environment, we can generically apply the term master schedule to any environment, be it retail, hospitality, service, or distribution. Decisions include scheduling employees work shifts. Medium-term forecasts are associated with the sales and operations planning process, commonly known by its acronym S & O P. S & O P is based on product family units and forecasting typically extends one to three years forward. Characteristics of S & O P include annual budgets and monthly volumes. Decisions in the medium-term may include adjusting staffing levels or shifts. And a subsequent need to add or shut down equipment or work centers. It may also involve decisions regarding the outsourcing of work to subcontractors, also known as the make versus buy decision. In the long-term, a company may make plans for, new factories, expanding distribution networks, entering new markets and introducing new product lines. Longterm decisions may also include adjusting to shrinking demand, which involves decisions such as closing factories, contracting the distribution network, leaving markets and culling product lines. The last long-term forecasting item is stock-keeping unit rationalization, typically referred to as S K U rationalization. These long-term forecasts are associated with business planning. A process that focuses on overall dollar volumes and typically extends three to 10 years or more into the future. The numbers include market share and projection for costs, revenue, and profit. It is important to note that what is being forecasted at each level depends on how long it takes to acquire that resource. For example, if it takes five years to build a new factory, this would be long-term forecasting. On the other hand, a decision on working overtime this weekend is short-term. Sometimes the difference relates to a specific industry. For example, a heavily regulated pharmaceutical processing facility may need certified technicians on the assembly line. In a growing economy with a tight labor market, the facility may need to plan for a year or more to hire qualified candidates. Compare this to a facility that employs low skilled labor that feeds product onto an automated assembly line. In a region with a relatively high unemployment rate, hiring off the street is easy and satisfies staffing requirements.