Every business depends on forecasting, whether its executives know it or not. How many new franchise stores should we open in 1990? Will we have enough cash on hand in November to pay expenses? Will our current staff be adequate to meet manufacturing demand in 1992? When do we need to reorder widgets? Forecasts are intended to answer those questions.
Until recently, forecasting was the domain of specialists in the dark science of statistical analysis and mathematical modeling. These people pore over the historical numbers generated by a company - monthly sales figures, for example - and then put them in motion, trying to find patterns and models that can be used to predict what might happen a month, a year or a decade ahead.
For especially complex forecasting jobs, like predicting how much the West German economy will benefit from changes in Eastern Europe, it still makes sense to hire a specialist. But many executives are discovering that today's powerful personal computers can handle all but the most complex forecasting chores.
Business Forecast Systems Inc., of Belmont, Mass., (617) 484-5050, has created three programs for personal computers made by the International Business Machines Corporation and compatible machines that allow experts and novices to forecast with exceptional ease. The most sophisticated product, Forecast Master Plus ($695), is aimed at the niche of executives who understand such concepts as multivariate state space and variable parametric regressions and thus do not need much hand-holding.
Lost already? Me too. For those of us who dozed through Statistics 101, the company offers Forecast Pro ($495), a forecasting tool that has a built-in expert system to guide the user. If Forecast Master Plus is thought of as a high-powered telescope, Forecast Pro is a pair of binoculars. And for those who only need a good pair of glasses to sharpen their vision a bit, there is Forecalc, a $149 program that allows users of the Lotus 1-2-3 (up to version 2.2) and Symphony spreadsheets to enter the forecasting field relatively painlessly.
The less expensive programs use fewer analytical tools. And they6 are not meant to create presentation-quality reports. Their relatively crude graphics are a weakness, and executives would do well to take these forecasts and plug them into a leading graphic program like Harvard Graphics before making a presentation.
Expert systems are becoming increasingly important business applications, especially in esoteric areas like statistics. In essence, the programmers have imbued Forecast Pro and Forecalc with a crude form of ''artificial intelligence'' that captures the collective wisdom of experts in the field - in this case the developers themselves, Robert L. Goodrich and Eric A. Stellwagen. Their expertise can then be applied to the user's problems.
For example, the user might define the problem and enter all the raw data needed for the analysis. But that is only a small part of the exercise: choosing the right model from among more than a dozen different forecasting techniques for extrapolating that data can greatly increase the user's confidence in the results.
A small retail business whose sales depend largely on certain holidays would need a smoothing technique, for example, that would take into account seasonality. Forecast Pro will automatically analyze the problem and recommend the optimal forecast model, and experienced users at the Coca-Cola Company and the American Telephone and Telegraph Company, among others, have reported that the program seems to pick the right one most of the time.
Many businesses test forecasting packages by feeding in historical data and turning the software loose on a problem whose outcome is already known - the effect of last year's interest rates on sales, for example. Employing different models would presumably yield results of varying accuracy. The expert system in Forecast Pro will even explain why it chooses one method over another.
Both Forecast Pro and Forecalc are intended for users who do not have a background in statistics. Forecalc is a sort of ''one-button'' forecasting machine that works from within a Lotus 1-2-3 or Symphony spreadsheet. Forecast Pro is also relatively easy to use, making extensive use of pull-down menus, but it is not for the cowardly. For those who understand such things, the principal statistical methods employed by Forecast Pro are exponential smoothing, Box-Jenkins and dynamic regression. Forecalc sticks with exponential smoothing.
At this point, we should note that some people will find it most helpful to read the Forecast Pro manual back-to-front. The third and last part of the manual is a statistical reference written by the developers, describing the basic principles in relatively simple English.
The authors favor exponential smoothing as the most general approach for most problems, since it requires less data and since it is easiest to fit to a particular model. Five types of smoothing, in the so-called Holt Winters family, are included in Pro and Forecalc. Pro also includes Box-Jenkins models (''an implementation of the univariate autoregressive integrated moving average procedure described by Box and Jenkins''), which are preferred in cases where there are more data and when the data are relatively stable, and a more complex family of models called dynamic regression.
Executives who decide to work with Forecast Pro or Forecalc should remember that no forecast is ever 100 percent accurate. No manipulation of fusty old numbers can account for the unexpected introduction of a competing product or a change in public taste, say, to orange widgets from green ones.
That's where the most important ''expert system'' of them all -the user - comes into play. An executive can overlay his or her insight, or even gut instincts, atop the computer-generated equations to refine predictions. At the same time, ''there is an advantage in the objective results that these programs produce,'' said Mr. Goodrich in an interview.