Production Management

1. Forecasting: Introduction & Its
Applications
Department of Mechanical Engineering
NITTTR, Chandigarh
Presented By:-
Deepam Goyal

2. CONTENTS
 Introduction
 Characteristics of Forecasting
 Principles & Need of Forecasting
 Forecasting Process
 Areas of Forecasting
 Advantages & Disadvantages of Forecasting
 Applications of Forecasting
 Case Study : Henkel
 References

3.  Forecasting :-
• It is the technique of estimating the relevant future
events and problems on the basis of past & present data.
• It is a systematic guess of the future course of events.
• It provides basis for a planning.
 Sales forecast:- Estimate of a firm’s revenue for a
specified time period.
INTRODUCTION

4. Contd..
 Why are we interested ?
 Affects the decisions we make today
 Where is forecasting used in POM ?
 Forecast demand for products and services
 Forecast availability/need for manpower
 Forecast inventory and material needs daily

5. Forecasting Prediction
Objective
Scientific
Free from ‘bias’
Reproducible
Error analysis
possible
Subjective
Intuitive
Individual bias
Non reproducible
Error analysis limited

6. Characteristics of Good Forecast
Compatible
with existing
database
system
GOOD
FORECAST
Timely
Online
Capability
Easy to Use &
Understand
Meaningful
Units
Writing
Presentation
ReliableAccurate

7. Six Key Principles Of Forecasting
Iteration
PrudenceDisaggregation
Judgement
Tangiblisation
Triangulation

8. Need of Forecasting
 Lead time require that decisions be made in
advance of uncertain events.
 is important for all strategic i.e. changing the
engineering design and planning decisions in a
supply chain.
 Forecasts of product demand, materials, labour,
financing are an important inputs to scheduling,
acquiring resources & determining resource
requirements.

9. Forecasting Process
6. Check forecast
accuracy with one
or more measures
4. Select a forecast
model that seems
appropriate for data
5. Develop/compute
forecast for period of
historical data
8a. Forecast over
planning horizon
9. Adjust forecast based
on additional
qualitative information
and insight
10. Monitor
results and
measure forecast
accuracy
8b. Select new forecast
model or adjust
parameters of existing
model
7. Is accuracy
of forecast
acceptable?
1. Identify the
purpose of forecast
3. Plot data and
identify patterns
2. Collect historical
data
Yes
No

10. Importance of Forecasting
Pivotal role in an
Organization Key to
Success
Development of a Effective
Business Control
Implementation of Co-ordination
Project Primacy to
Planning

11. Areas Of Forecasting
Technology
AREAS OF
FORECASTING
Supply of
Labour
Economic
Condition
Growth Trend
New Laws &
Regulations
Social Change
Political
ChangeCompetition

12. Advantages of Forecasting
 The anticipation of future problems and events to
accelerate early achievements of objectives.
 Facilitates Planning
 Ensures Coordination
 Easy Controlling

13. Limitation of Forecasting
 Forecasting is to be made on the basis of certain assumptions
and human judgments.
 Too much of expectation will cause disappointment and
impair the initiative of the executives.
 It requires high degree of skill and the process must be
undertaken by specialists.
 Long-term forecasts will be less accurate as compared to
short-term forecast
 Heavy cost and time

14. Applications of Forecasting
1. Supply chain management
• includes the movement and storage of raw materials, work-in-
process inventory, and finished goods from point of origin to point of
consumption.
2. Economic forecasting
• is the process of making predictions about the economy
3.Earthquake Forecasting
• defined as the specification of the time, location, and magnitude of
a future earthquake within stated limits", and particularly of
"the next strong earthquake to occur in a region

15. 4.Egain Forecasting
• The process of climate change and increasing energy prices has
led to the usage of Egain Forecasting of buildings
5.Land Use Forecasting
• undertakes to project the distribution and intensity of trip
generating activities in the urban area
6.Player & Team Performance in Sports
• PECOTA, is a sabermetric system for forecasting Major League
Baseball player performance
7. Political Forecasting
• aims at predicting the outcome of elections
Contd..

16. 8.Transportation Forecasting
• the process of estimating the number of vehicles or people
that will use a specific transportation facility in the future
9. Telecommunications Forecasting
• Telecommunications service providers perform forecasting
calculations to assist them in planning their networks
10. Product Forecasting
• is the science of predicting the degree of success a new
product will enjoy in the marketplace.
11. Sales Forecasting
Contd..

17. 12.Technology Forecasting
• attempts to predict the future characteristics of useful
technological machines, procedures or techniques
13.Weather Forecasting
• is the application of science and technology to predict the state
of the atmosphere for a given location.
14. Flood Forecasting
• the use of real-time precipitation and streamflow data
in rainfall-runoff and streamflow routing models to forecast flow
rates and water levels for periods ranging from a few hours to
days ahead, depending on the size of the watershed or river
basin.
Contd..

18. CASE STUDY : HENKEL
 Introduction :-
 Henkel is a manufacturer which operates in three business areas:
- home care products
- sanitary
- adhesive technologies
 The Henkel group has a workforce of approximately 48,000
employees in over 120 countries around the world, and is amongst
the 500 most profitable companies.
 Aim :-
To improve the accuracy of their sales forecasts of existing and
upcoming products. The goal was not an incremental improvement,
but a “step-change” in the forecasting accuracy.

19.  Company’s Problem :-
 The main reasons to change the existing forecasting model
was the low forecasting accuracy and difficulties with
evaluating the potential of new products.
 Price promotions performed by competitors influenced
Henkel’s data-only based predictions and made them
inaccurate.

20.  Social forecasting at Henkel :-
• The key to increasing the forecasting accuracy is the use of incentives
in Social Forecasting.
• Each month the top 10 forecasters can win iPads and other valuable
prizes. These top 10 forecasters also gain recognition.
• The difference in a survey is that participants are not rewarded for
their mere participation but for their actual forecasting accuracy.

21.  Results :-
 These incentives greatly increased the forecasting accuracy as we
will show below.
 The average accuracy of Social Forecasting is 85.3%, while
Henkel’s method achieved only 69.3%.

22. REFERENCES
 Narasimhan, S.L., D.W. Mcleavey, and P.J. Billington. “Production
Planning And Inventory Control”. 2. New Delhi: Prentice Hall of India
Learning Private Limited, 2009. 25-52. Print.
 Groover, M.P., Emory W. Zimmers JR. “CAD/CAM:Computer-Aided
Design and Manufacturing”. 25. New Delhi: Prentice Hall of India
Private Limited, 2002. 324-332. Print.
 Mukhopadhyay, S.K. ”Production Planning and Control”. 2. New
Delhi: Prentice Hall of India Private Limited, 2004. 27-63. Print.
 Reddy, J.Mahender. ”Demand forecasting : methods, applications &
cases”. 1. New Delhi: Light & Life Publishers, 1981. 152-192. Print.
Internet Source :-
 www.crowdsourcing.org

23. Email ID :- bkdeepamgoyal@gmail.com