Every day, managers make decisions without knowing what will happen in the future. Inventory is ordered though no one knows what sales will be, new equipment is purchased though no one knows the demand for products, and investments are made though no one knows what profits will be. Managers are always trying to reduce this uncertainty and to make better estimates of what will happen in the future. Accomplishing this is the main purpose of forecasting.

There are many ways to forecast the future. In numerous firms (especially smaller ones), the entire process is subjective, involving seat-of-the-pants methods, intuition, and years of experience.

There are also more formal forecasting techniques, both quantitative and qualitative in nature. The primary focus of this chapter will be understanding time-series models and determining which model works best with a particular set of data.