This document discusses various forecasting techniques used to predict future events and trends. It describes short, medium, and long-range forecasts used for production planning, budgeting, and new product development. Both qualitative methods like executive opinion and surveys, and quantitative methods like time series analysis, moving averages, and regression are covered. The key factors influencing forecasts like product life cycles and demand trends are also explained.
Inventory System Defined
Purpose and types of inventory
Independent vs. Dependent Demand
Single-Period Inventory Model
Multi-Period Inventory Models: Basic Fixed-Order Quantity Models
Multi-Period Inventory Models: Basic Fixed-Time Period Model
Miscellaneous Systems and Issues
A-B-C Approach
Inventory costs
Types of loading, production & operations managementMahima Mutnuru
Types of Loading-
Infinite Loading
Finite Loading
Also know about Scheduling as Loading is an vital part of Scheduling.
Explained with examples.
Important concept in Production and Operation Management.
The document discusses capacity planning, which involves determining the production capacity needed by an organization to meet changing demand. It covers determining current and future capacity needs, identifying options to modify capacity, and addressing imbalances between demand and capacity. Short-term adjustments and long-term responses are discussed. Models like present value analysis, aggregate planning, and decision trees can be useful for capacity planning. Economies of scale and concepts like efficiency and utilization are also summarized.
Here are the steps to solve this problem:
D = Annual demand = 250,000 footballs
P = Production rate = 2000 footballs/day
U = Usage rate = 250,000 footballs / 250 days = 1000 footballs/day
S = Setup cost = Rs. 2500
H = Carrying cost = Rs. 100 per football
A) Optimal run size (Q*) = √(2DU/H) = √(2 * 250,000 * 2500/100) = 5000 footballs
B) Minimum total annual cost
Imax = (Q*/P) * (P - U) = (5000/2000) * (2000 - 1000) = 2500
This presentation explains about the Operations Management concept Reorder point, different cases with examples, fixed order interval model, single period model etc.
Production planning and control involves determining resource requirements, production schedules, and quality control to efficiently produce goods at the lowest cost. It aims to coordinate departments, remove obstacles, achieve targets on time, and provide contingency stocks. Production control implements plans through work orders and ensures availability of inputs and adherence to schedules. Techniques include planning, routing, scheduling, dispatching, follow-up, expediting, and inspection. Forecasting estimates future demand through time series methods and is essential for supply chain, quality, and strategic planning.
Quantitative and qualitative forecasting techniques omHallmark B-school
Qualitative forecasting uses expert judgment rather than numerical analysis to estimate future outcomes. It relies on the knowledge and insights of experienced employees and consultants. This approach differs from quantitative forecasting, which analyzes historical data to discern future trends. Qualitative forecasting techniques include the Delphi technique, scenario writing, and subjective approaches.
The document discusses achieving strategic fit between a company's competitive strategy and supply chain strategy. It describes three key steps: 1) Understanding customer demand uncertainty, 2) Understanding supply chain responsiveness and costs, 3) Ensuring the supply chain capabilities match the customer needs. Expanding strategic scope across functions and partners improves coordination and profitability for all members of the supply chain.
Inventory System Defined
Purpose and types of inventory
Independent vs. Dependent Demand
Single-Period Inventory Model
Multi-Period Inventory Models: Basic Fixed-Order Quantity Models
Multi-Period Inventory Models: Basic Fixed-Time Period Model
Miscellaneous Systems and Issues
A-B-C Approach
Inventory costs
Types of loading, production & operations managementMahima Mutnuru
Types of Loading-
Infinite Loading
Finite Loading
Also know about Scheduling as Loading is an vital part of Scheduling.
Explained with examples.
Important concept in Production and Operation Management.
The document discusses capacity planning, which involves determining the production capacity needed by an organization to meet changing demand. It covers determining current and future capacity needs, identifying options to modify capacity, and addressing imbalances between demand and capacity. Short-term adjustments and long-term responses are discussed. Models like present value analysis, aggregate planning, and decision trees can be useful for capacity planning. Economies of scale and concepts like efficiency and utilization are also summarized.
Here are the steps to solve this problem:
D = Annual demand = 250,000 footballs
P = Production rate = 2000 footballs/day
U = Usage rate = 250,000 footballs / 250 days = 1000 footballs/day
S = Setup cost = Rs. 2500
H = Carrying cost = Rs. 100 per football
A) Optimal run size (Q*) = √(2DU/H) = √(2 * 250,000 * 2500/100) = 5000 footballs
B) Minimum total annual cost
Imax = (Q*/P) * (P - U) = (5000/2000) * (2000 - 1000) = 2500
This presentation explains about the Operations Management concept Reorder point, different cases with examples, fixed order interval model, single period model etc.
Production planning and control involves determining resource requirements, production schedules, and quality control to efficiently produce goods at the lowest cost. It aims to coordinate departments, remove obstacles, achieve targets on time, and provide contingency stocks. Production control implements plans through work orders and ensures availability of inputs and adherence to schedules. Techniques include planning, routing, scheduling, dispatching, follow-up, expediting, and inspection. Forecasting estimates future demand through time series methods and is essential for supply chain, quality, and strategic planning.
Quantitative and qualitative forecasting techniques omHallmark B-school
Qualitative forecasting uses expert judgment rather than numerical analysis to estimate future outcomes. It relies on the knowledge and insights of experienced employees and consultants. This approach differs from quantitative forecasting, which analyzes historical data to discern future trends. Qualitative forecasting techniques include the Delphi technique, scenario writing, and subjective approaches.
The document discusses achieving strategic fit between a company's competitive strategy and supply chain strategy. It describes three key steps: 1) Understanding customer demand uncertainty, 2) Understanding supply chain responsiveness and costs, 3) Ensuring the supply chain capabilities match the customer needs. Expanding strategic scope across functions and partners improves coordination and profitability for all members of the supply chain.
This document outlines key aspects of aggregate planning including:
- Aggregate planning matches supply and demand over an intermediate time horizon to determine necessary resource capacity. It balances demand forecasts with available resources.
- Strategies for adjusting capacity include level production, overtime/under-time work, subcontracting, and part-time hiring. Strategies for managing demand include shifting demand across time periods, incentives, and partnering with suppliers.
- Quantitative techniques for aggregate production planning include linear programming, transportation methods, linear decision rules, and management coefficients models. These help determine optimal production and capacity levels.
Information is a key driver of supply chain performance. It consists of data regarding facilities, inventory, transportation, costs, prices, and customers throughout the supply chain. Information has a direct impact on all other supply chain drivers and can make the supply chain more responsive and efficient. Key performance metrics for information include data accuracy, system uptime, data accessibility, and timeliness of sharing and reporting data. Information plays an important role in creating strategic fit between the supply chain strategy and competitive strategy by enabling responsiveness to meet customer needs while achieving production and distribution efficiencies.
Aggregate planning involves determining production levels over the intermediate time horizon of 3 months to 1 year. The objectives are to balance customer service, workforce stability, costs, and profits. Inputs that affect aggregate plans include engineering, materials, operations, marketing, accounting, and human resources. Approaches to aggregate planning include top-down and bottom-up methods. Capacity planning determines required production capacity to meet demand forecasts.
PERT and CPM are network-based project management techniques used to plan, schedule, and control projects. PERT is appropriate for uncertain projects like research and development, using three time estimates and focusing on minimizing time. CPM is better suited for predictable projects like construction, using a single time estimate and focusing on balancing time and cost. The two techniques use similar network approaches but differ in their probabilistic vs. deterministic models, event-based vs. activity-based orientations, and applicability to uncertain vs. predictable activities.
This document provides an overview of Sales & Operations Planning (S&OP), a centralized planning process that aims to align demand, supply, and financial plans across all levels of an organization. S&OP differs from traditional functional planning approaches by taking a holistic view and involving senior management to reach consensus on a single integrated plan. The presentation describes the typical S&OP process, which involves monthly meetings to review data, develop demand and supply plans, identify issues, and make decisions. Critical success factors for effective S&OP implementation include top management involvement, structured routine meetings, cross-functional participation, and integrated planning technology. Benefits of S&OP include improved goal alignment, communication, inventory management, and revenue predictability.
This document provides an overview of sales and operations planning (S&OP). S&OP is a collaborative planning process that aligns all business functions to a single plan to meet market demand profitably. It differs from traditional functional planning approaches by taking a holistic view of demand, supply, and financial plans. The S&OP process involves gathering data, demand planning, supply planning, pre-meetings, and executive meetings to align plans and resolve issues. Critical success factors include top management involvement, structured meetings, cross-functional participation, and integrated planning technology. Benefits include improved profitability, inventory management, and communication across business functions.
The document summarizes key concepts about forecasting from the 8th edition of the textbook "Operations Management" by William J. Stevenson. It discusses definitions of forecasting, the importance and uses of forecasts in various business functions. Methods of forecasting include qualitative judgmental forecasts, quantitative time series analysis, and associative models using explanatory variables. Specific forecasting techniques covered include naive forecasts, moving averages, exponential smoothing, trend analysis, and regression. The document also addresses evaluating forecast accuracy and controlling forecasts.
The document discusses the major drivers of supply chain performance which include logistical drivers like facilities, inventory, and transportation as well as cross-functional drivers like information, sourcing, and pricing. It then provides details on each of these drivers, including the different types of facilities, approaches to inventory and transportation, how information is used, components of sourcing and pricing decisions. It also mentions some obstacles to achieving strategic fit like increasing product variety, demanding customers, and globalization.
Forecasting involves predicting future events and is commonly used to estimate future demand for products and services. There are different time horizons for forecasts, including short-range (up to 1 year), medium-range (3 months to 3 years), and long-range (3 years or more). Forecasting methods can be quantitative, using mathematical techniques and historical data, or qualitative, using intuition and expert opinions. The objectives of demand forecasting include production planning, financial planning, and long-term strategic planning.
Operations Management course develops, among the students, a knowledge and a set of skills to manage operations of a unit, section or an organization in an efficient way. The students will learn how to optimize the resource utilization for the maximum output.
This document discusses forecasting techniques in time series analysis and causal models. It describes time series models as analyzing a time-ordered sequence of observations over regular intervals to identify trends. These include simple exponential smoothing, which weights older data less and newer data more, and moving averages, which use an average of past periods to forecast the next period. Causal models are based on relationships between dependent and independent variables, assuming past trends will continue influencing future variables. Linear regression is provided as an example causal model that fits a line to measure the effect of a single independent variable.
The document discusses materials planning and materials requirements planning (MRP). It explains that MRP is a production planning process that takes inputs like the master production schedule and bill of materials to determine requirements and timing for items. MRP helps control inventory levels, assign production priorities, and plan capacity. It generates work orders, purchase orders, and other reports to schedule item production and ordering. Accurate information is important for effective MRP.
This document discusses various concepts related to operations scheduling. It defines operations scheduling and describes how it involves assigning jobs to work centers and machines, determining start and completion times, allocating resources, and establishing time sequences. It outlines objectives like meeting delivery dates and minimizing costs/inventory. Performance measures used in scheduling like job flow time, makespan, past due jobs and utilization are also defined. Finally, it discusses sequencing jobs at single and multiple workstations using different priority rules.
This document discusses scheduling concepts and techniques. It begins with an overview of scheduling and different types of scheduling like demand scheduling, workforce scheduling, and operations scheduling. It then provides examples of scheduling crew assignments for airline flights and scheduling employees for a delivery service. The document also covers topics like Gantt charts, job shop dispatching rules, and an example of scheduling jobs at a single workstation using earliest due date and shortest processing time rules.
S&O Planning translates strategic business plans into production rates to meet financial, customer service, and other goals. It continually updates production, financial, and sales plans through regular meetings with executives to resolve tradeoffs and validate resource availability. Production planning develops tactical plans based on setting overall manufacturing output levels to satisfy planned sales while meeting profitability and productivity goals. Aggregate planning focuses on product families or groups, maintaining inventory levels, determining resource needs, and comparing load to capacity. It aims to balance demand and capacity over time through strategies like leveling output or chasing demand, using options like inventory, overtime, hiring/layoffs, and subcontracting.
Production planning and scheduling helps organizations deliver products to customers on time and maintain desired inventory levels. It determines how much to produce and when by optimally utilizing plant capacity and balancing output. The production planning process involves aggregate output planning to determine production levels over 6-18 months without product details. Master production scheduling then specifies what products to make, when, and how much in accordance with aggregate plans and customer demand. Material requirements planning determines when to receive and release materials to support the master schedule.
Economies of scale to exploit quantity discountVishal Gupta
- When the retailer orders in a lot size of 6,325 without coordination, the annual supply chain cost is Rs. 9,803.
- With coordination and a lot size of 9,165, the annual supply chain cost decreases to Rs. 9,165 - a savings of Rs. 638.
- To incentivize the retailer to order in lots of 9,165, the manufacturer can offer a quantity discount of Rs. 2.9978 per unit for orders of 9,165 units or more.
Lectures on Production Planning and Control for B.Sc. Students - Industrial Engineering Branch -Department of Production Engineering and Metallurgy- University of Technology - Baghdad -Iraq
A) What is operations management?
B) Operations management is important in all types of organization
C) The input–transformation–output process
D) The process hierarchy
E) Operations processes have different characteristics
F) The activities of operations management
This document discusses forecasting methods used in operations management. It describes forecasting as predicting future events and underlying all business decisions regarding production, inventory, personnel and facilities. Short-term forecasts are up to 1 year and used for purchasing and scheduling, while medium forecasts are 3 months to 3 years for planning and budgeting. Long-term forecasts over 3 years guide new product planning and research. Qualitative methods use intuition for new situations while quantitative methods employ mathematics for stable, historical data situations. The document outlines various qualitative and quantitative forecasting techniques.
The document discusses various forecasting techniques including qualitative and quantitative methods. It describes exponential smoothing, which weights recent data more heavily than older data. An example shows how to use exponential smoothing with a smoothing constant of 0.1 to forecast quarterly port cargo volumes over 8 quarters. The forecast for the 9th quarter is calculated as 178.02 based on the previous actual and forecast values.
This document outlines key aspects of aggregate planning including:
- Aggregate planning matches supply and demand over an intermediate time horizon to determine necessary resource capacity. It balances demand forecasts with available resources.
- Strategies for adjusting capacity include level production, overtime/under-time work, subcontracting, and part-time hiring. Strategies for managing demand include shifting demand across time periods, incentives, and partnering with suppliers.
- Quantitative techniques for aggregate production planning include linear programming, transportation methods, linear decision rules, and management coefficients models. These help determine optimal production and capacity levels.
Information is a key driver of supply chain performance. It consists of data regarding facilities, inventory, transportation, costs, prices, and customers throughout the supply chain. Information has a direct impact on all other supply chain drivers and can make the supply chain more responsive and efficient. Key performance metrics for information include data accuracy, system uptime, data accessibility, and timeliness of sharing and reporting data. Information plays an important role in creating strategic fit between the supply chain strategy and competitive strategy by enabling responsiveness to meet customer needs while achieving production and distribution efficiencies.
Aggregate planning involves determining production levels over the intermediate time horizon of 3 months to 1 year. The objectives are to balance customer service, workforce stability, costs, and profits. Inputs that affect aggregate plans include engineering, materials, operations, marketing, accounting, and human resources. Approaches to aggregate planning include top-down and bottom-up methods. Capacity planning determines required production capacity to meet demand forecasts.
PERT and CPM are network-based project management techniques used to plan, schedule, and control projects. PERT is appropriate for uncertain projects like research and development, using three time estimates and focusing on minimizing time. CPM is better suited for predictable projects like construction, using a single time estimate and focusing on balancing time and cost. The two techniques use similar network approaches but differ in their probabilistic vs. deterministic models, event-based vs. activity-based orientations, and applicability to uncertain vs. predictable activities.
This document provides an overview of Sales & Operations Planning (S&OP), a centralized planning process that aims to align demand, supply, and financial plans across all levels of an organization. S&OP differs from traditional functional planning approaches by taking a holistic view and involving senior management to reach consensus on a single integrated plan. The presentation describes the typical S&OP process, which involves monthly meetings to review data, develop demand and supply plans, identify issues, and make decisions. Critical success factors for effective S&OP implementation include top management involvement, structured routine meetings, cross-functional participation, and integrated planning technology. Benefits of S&OP include improved goal alignment, communication, inventory management, and revenue predictability.
This document provides an overview of sales and operations planning (S&OP). S&OP is a collaborative planning process that aligns all business functions to a single plan to meet market demand profitably. It differs from traditional functional planning approaches by taking a holistic view of demand, supply, and financial plans. The S&OP process involves gathering data, demand planning, supply planning, pre-meetings, and executive meetings to align plans and resolve issues. Critical success factors include top management involvement, structured meetings, cross-functional participation, and integrated planning technology. Benefits include improved profitability, inventory management, and communication across business functions.
The document summarizes key concepts about forecasting from the 8th edition of the textbook "Operations Management" by William J. Stevenson. It discusses definitions of forecasting, the importance and uses of forecasts in various business functions. Methods of forecasting include qualitative judgmental forecasts, quantitative time series analysis, and associative models using explanatory variables. Specific forecasting techniques covered include naive forecasts, moving averages, exponential smoothing, trend analysis, and regression. The document also addresses evaluating forecast accuracy and controlling forecasts.
The document discusses the major drivers of supply chain performance which include logistical drivers like facilities, inventory, and transportation as well as cross-functional drivers like information, sourcing, and pricing. It then provides details on each of these drivers, including the different types of facilities, approaches to inventory and transportation, how information is used, components of sourcing and pricing decisions. It also mentions some obstacles to achieving strategic fit like increasing product variety, demanding customers, and globalization.
Forecasting involves predicting future events and is commonly used to estimate future demand for products and services. There are different time horizons for forecasts, including short-range (up to 1 year), medium-range (3 months to 3 years), and long-range (3 years or more). Forecasting methods can be quantitative, using mathematical techniques and historical data, or qualitative, using intuition and expert opinions. The objectives of demand forecasting include production planning, financial planning, and long-term strategic planning.
Operations Management course develops, among the students, a knowledge and a set of skills to manage operations of a unit, section or an organization in an efficient way. The students will learn how to optimize the resource utilization for the maximum output.
This document discusses forecasting techniques in time series analysis and causal models. It describes time series models as analyzing a time-ordered sequence of observations over regular intervals to identify trends. These include simple exponential smoothing, which weights older data less and newer data more, and moving averages, which use an average of past periods to forecast the next period. Causal models are based on relationships between dependent and independent variables, assuming past trends will continue influencing future variables. Linear regression is provided as an example causal model that fits a line to measure the effect of a single independent variable.
The document discusses materials planning and materials requirements planning (MRP). It explains that MRP is a production planning process that takes inputs like the master production schedule and bill of materials to determine requirements and timing for items. MRP helps control inventory levels, assign production priorities, and plan capacity. It generates work orders, purchase orders, and other reports to schedule item production and ordering. Accurate information is important for effective MRP.
This document discusses various concepts related to operations scheduling. It defines operations scheduling and describes how it involves assigning jobs to work centers and machines, determining start and completion times, allocating resources, and establishing time sequences. It outlines objectives like meeting delivery dates and minimizing costs/inventory. Performance measures used in scheduling like job flow time, makespan, past due jobs and utilization are also defined. Finally, it discusses sequencing jobs at single and multiple workstations using different priority rules.
This document discusses scheduling concepts and techniques. It begins with an overview of scheduling and different types of scheduling like demand scheduling, workforce scheduling, and operations scheduling. It then provides examples of scheduling crew assignments for airline flights and scheduling employees for a delivery service. The document also covers topics like Gantt charts, job shop dispatching rules, and an example of scheduling jobs at a single workstation using earliest due date and shortest processing time rules.
S&O Planning translates strategic business plans into production rates to meet financial, customer service, and other goals. It continually updates production, financial, and sales plans through regular meetings with executives to resolve tradeoffs and validate resource availability. Production planning develops tactical plans based on setting overall manufacturing output levels to satisfy planned sales while meeting profitability and productivity goals. Aggregate planning focuses on product families or groups, maintaining inventory levels, determining resource needs, and comparing load to capacity. It aims to balance demand and capacity over time through strategies like leveling output or chasing demand, using options like inventory, overtime, hiring/layoffs, and subcontracting.
Production planning and scheduling helps organizations deliver products to customers on time and maintain desired inventory levels. It determines how much to produce and when by optimally utilizing plant capacity and balancing output. The production planning process involves aggregate output planning to determine production levels over 6-18 months without product details. Master production scheduling then specifies what products to make, when, and how much in accordance with aggregate plans and customer demand. Material requirements planning determines when to receive and release materials to support the master schedule.
Economies of scale to exploit quantity discountVishal Gupta
- When the retailer orders in a lot size of 6,325 without coordination, the annual supply chain cost is Rs. 9,803.
- With coordination and a lot size of 9,165, the annual supply chain cost decreases to Rs. 9,165 - a savings of Rs. 638.
- To incentivize the retailer to order in lots of 9,165, the manufacturer can offer a quantity discount of Rs. 2.9978 per unit for orders of 9,165 units or more.
Lectures on Production Planning and Control for B.Sc. Students - Industrial Engineering Branch -Department of Production Engineering and Metallurgy- University of Technology - Baghdad -Iraq
A) What is operations management?
B) Operations management is important in all types of organization
C) The input–transformation–output process
D) The process hierarchy
E) Operations processes have different characteristics
F) The activities of operations management
This document discusses forecasting methods used in operations management. It describes forecasting as predicting future events and underlying all business decisions regarding production, inventory, personnel and facilities. Short-term forecasts are up to 1 year and used for purchasing and scheduling, while medium forecasts are 3 months to 3 years for planning and budgeting. Long-term forecasts over 3 years guide new product planning and research. Qualitative methods use intuition for new situations while quantitative methods employ mathematics for stable, historical data situations. The document outlines various qualitative and quantitative forecasting techniques.
The document discusses various forecasting techniques including qualitative and quantitative methods. It describes exponential smoothing, which weights recent data more heavily than older data. An example shows how to use exponential smoothing with a smoothing constant of 0.1 to forecast quarterly port cargo volumes over 8 quarters. The forecast for the 9th quarter is calculated as 178.02 based on the previous actual and forecast values.
8 9 forecasting of financial statementsJohn McSherry
1) Lectures 8 and 9 cover forecasting techniques and credit risk analysis. Readings are provided on analyst forecasts and credit risk assessment models.
2) There are two general approaches to forecasting - non-econometric qualitative methods typically used by analysts, and econometric quantitative methods. Top-down and bottom-up are common non-econometric techniques.
3) Financial ratios tend to revert to historical norms over time. An analysis of a company's ratios should consider the typical behavior of those ratios and anchor forecasts accordingly.
This document outlines key concepts related to forecasting, including:
- The three time horizons for forecasting: short, medium, and long range.
- Qualitative and quantitative forecasting methods such as jury of executive opinion, Delphi method, moving averages, and exponential smoothing.
- Components of time series data including trend, seasonality, cyclicality, and randomness.
- Steps in a forecasting system and challenges with producing accurate forecasts.
- How Disney uses forecasting across its global operations to inform decisions.
The document discusses various quantitative forecasting techniques including time series methods like moving averages and exponential smoothing. It provides examples of how to calculate 3-period moving averages and exponential smoothing forecasts using sample sales data. Exponential smoothing places more weight on recent observations compared to moving averages. The smoothing constant determines how quickly older data is discounted.
Demand management involves understanding customer needs, planning products and services, and fulfilling demands across a business and its partners. Effective demand management relies on demand forecasting to predict future needs and inform resource planning. Forecasting considers factors like historical data, demand variability, and required accuracy. Accurate forecasts allow businesses to optimize inventory, capacity, and costs to best meet customer demands over different time horizons.
This document discusses value stream mapping and analysis. It defines a value stream as all actions required to deliver a product or service to a customer. It describes identifying and mapping current and future states, which typically show 80-90% of current steps as waste. Implementing change requires management commitment, empowered value stream managers, and kaizen teams to drive improvements like reduced lead times, inventories, and defects. Roadblocks can include habits, metrics, and lack of system thinking.
Demand forecasting is essential for a firm to enable it to produce the required quantities at the right time and proper arrangements of all factors of production (Land, Labour, Capital, and Organisation). Demand Forecasting helps a firm to assess the probable demand for its products and plan its production accordingly.
This document discusses demand forecasting in supply chain management. It defines forecasting as predicting future events and explains its importance for business decisions related to production, inventory, personnel and facilities. There are three forecasting time horizons: short-range up to 1 year, medium-range 3 months to 3 years, and long-range over 3 years. Quantitative methods use historical data and mathematical techniques while qualitative methods rely on intuition for new products and technologies with little data. The seven steps in forecasting are determining use and items, time horizon, models, data collection, making the forecast, and validation. Aggregate planning helps optimize costs and profits by balancing demand forecasts with capacity, inventory, workforce and production levels over multiple time periods.
Demand forecasting is used to predict future demand for products and services. There are short, medium, and long-range forecasts used for production planning, budgeting, and new product development. Qualitative and quantitative methods are used depending on data availability. The aggregate planning process involves determining demand and capacity, developing alternative plans, and selecting the optimal plan to minimize costs while meeting demand and capacity constraints. Accurate demand forecasting is crucial for aggregate planning and supply chain management.
The document discusses techniques for sales forecasting. It describes sales forecasting as projecting expected customer demand for products or services to help with business planning. Both qualitative and quantitative techniques are covered. Qualitative techniques include executive opinion, Delphi method, and surveys of buyers. Quantitative techniques covered are projection of past sales, time-series analysis, moving average method, and exponential smoothing. The document provides details on how each technique is implemented to develop a sales forecast.
Forecasting involves making predictions about the future. In finance, forecasting is used by companies to estimate earnings or other data for subsequent periods. Traders and analysts use forecasts in valuation models, to time trades, and to identify trends. Forecasts are often predicated on historical data.
Equity analysts use forecasting to extrapolate how trends, such as gross domestic product (GDP) or unemployment, will change in the coming quarter or year. Finally, statisticians can utilize forecasting to analyze the potential impact of a change in business operations. For instance, data may be collected regarding the impact of customer satisfaction by changing business hours or the productivity of employees upon changing certain work conditions. These analysts then come up with earnings estimates that are often aggregated into a consensus figure. If actual earnings announcements miss the estimates, it can have a large impact on a company’s stock price.
Forecasting addresses a problem or set of data. Economists make assumptions regarding the situation being analyzed that must be established before the variables of the forecasting are determined. Based on the items determined, an appropriate data set is selected and used in the manipulation of information. The data is analyzed, and the forecast is determined. Finally, a verification period occurs when the forecast is compared to the actual results to establish a more accurate model for forecasting in the future.
The further out the forecast, the higher the chance that the estimate will be inaccurate.
Forecasting Techniques
In general, forecasting can be approached using qualitative techniques or quantitative ones. Quantitative methods of forecasting exclude expert opinions and utilize statistical data based on quantitative information. Quantitative forecasting models include time series methods, discounting, analysis of leading or lagging indicators, and econometric modeling that may try to ascertain causal links.
Qualitative Techniques
Qualitative forecasting models are useful in developing forecasts with a limited scope. These models are highly reliant on expert opinions and are most beneficial in the short term. Examples of qualitative forecasting models include interviews, on-site visits, market research, polls, and surveys that may apply the Delphi method (which relies on aggregated expert opinions).
Gathering data for qualitative analysis can sometimes be difficult or time-consuming. The CEOs of large companies are often too busy to take a phone call from a retail investor or show them around a facility. However, we can still sift through news reports and the text included in companies’ filings to get a sense of managers’ records, strategies, and philosophies.
Time Series Analysis
A time series analysis looks at historical data and how various variables have interacted with one another in the past. These statistical relationships are then extrapolated into the future to generate
This document discusses various demand forecasting methods and facility planning concepts. It begins by explaining the need for demand forecasting and some common forecasting methods like time series analysis, simple moving average, exponential smoothing, and regression analysis. It also discusses qualitative forecasting techniques like market research, focus groups, and historical analogy. The document then covers factors that influence facility location according to various theories. Finally, it provides a brief overview of capacity planning and the key steps involved.
This document discusses forecasting methods for predicting future demand. It covers qualitative methods like jury of executive opinion and quantitative methods like naive forecasting, moving averages, and exponential smoothing. Exponential smoothing assigns weights to past demand that decrease exponentially, with the most recent demand weighted most heavily. The smoothing constant determines how quickly the weights decrease. Forecasting allows for better planning of human resources, capacity, and supply chain management.
- Forecasting involves making predictions about future market conditions and demand. It is an important part of business planning but forecasts will always be imperfect.
- Market size refers to the number of potential buyers and sellers in a market. Understanding market size is important for launching new products or services. Qualitative and quantitative models can be used to forecast market size.
- Qualitative models include expert opinion methods like the Delphi method and jury of executive opinion. Quantitative time series models analyze historical demand patterns using techniques like moving averages, exponential smoothing, and regression analysis. These techniques help minimize forecast errors.
Fred Duchow has over 25 years of experience in master scheduling, production planning and control, and manufacturing engineering. He has a track record of improving production processes, resolving issues, and ensuring accurate reporting. Duchow is skilled at troubleshooting, data analysis, and working with both manufacturing and IT teams.
Lec-3 Forecasting.pdf Data science collegemsherazmalik1
The document discusses various forecasting techniques used to predict future events or trends based on historical data patterns. It describes qualitative forecasting methods that rely on expert judgment and quantitative time series methods. Some key time series forecasting techniques mentioned include naive methods, simple moving averages, and weighted moving averages. The document emphasizes that while forecasts are often imperfect, having some prediction or "educated guess" about the future is generally better than no forecast at all for business planning purposes.
Forecasting plays a key role in supply chain planning and decision-making. Accurate forecasts are needed for production scheduling, inventory management, marketing activities, finance, and personnel planning. However, forecasts are never perfectly accurate. A variety of quantitative and qualitative forecasting methods are used, from time series analysis to surveys of customer intentions. Managing both supply and demand can help address predictable variability in demand over time. Inventory, capacity, pricing, and promotions all need to be considered to balance costs and customer service.
The document discusses various forecasting techniques used to predict future values based on historical patterns. It describes qualitative methods like executive judgment and quantitative time series methods including naive forecasting, simple moving averages, and weighted moving averages. Forecasting is important for business planning in areas like production, inventory, sales and more. Accurate forecasts are challenging to achieve but provide better guidance than no forecasts at all.
The document provides an overview of case interviews for management consulting roles. It discusses what a case interview is, why companies use them, and how to manage the interview. It then focuses on frameworks that can be used to structure analysis, including economic frameworks like supply/demand and profitability, industry frameworks like Porter's Five Forces, and firm-level frameworks like the Growth-Share Matrix. The document emphasizes using frameworks to drive structured analysis within time constraints.
The document discusses various strategic management tools used by Coca-Cola including a value chain analysis, Porter's five forces analysis, BCG matrix, product mix/Ansoff matrix, and environmental threats and opportunities profile. It provides details of Coca-Cola's primary and support activities in the value chain. It then analyzes Coca-Cola using Porter's five forces framework, identifying the threat of substitutes and competitive rivalry as medium to high pressures.
This document is a summer internship project report submitted by Manoj Gujar to Manipal University in partial fulfillment of a BBA degree. The report discusses Manoj's internship at Rajsri Diamond Tool Pvt. Ltd., where he helped develop a training module for sales executives. The report includes sections on the company profile, credit cards, RedCarpet's funding, competitors, and the benefits of the internship experience.
Credit ratings are evaluations of a debtor's ability to pay back debt, conducted by credit rating agencies. They use both public and private qualitative and quantitative information to assess risk of default. Credit ratings influence interest rates that companies and governments pay when issuing bonds. Higher credit ratings indicate lower risk of default, while lower ratings suggest greater risk. Credit ratings benefit both investors, by informing investment decisions, and companies, by improving image and potentially lowering borrowing costs. The top credit rating agencies globally are Moody's, S&P, and Fitch. In India, the major agencies are CRISIL, ICRA, and CARE.
Risk management is a process that allows businesses to understand risks and manage them proactively. It involves identifying potential risks, estimating the likelihood and impact of those risks, and then taking steps to mitigate risks through avoidance, sharing risks with others, accepting certain risks, or putting preventative and detective controls in place. Understanding and managing risks can help businesses optimize their chances of success.
The document discusses the benefits of exercise for mental health. Regular physical activity can help reduce anxiety and depression and improve mood and cognitive function. Exercise causes chemical changes in the brain that may help protect against mental illness and improve symptoms.
The document discusses the history and development of life insurance in India. It notes that life insurance can be traced back to Vedic times, and that the first Indian life assurance society, Bombay Mutual Assurance Society, was formed in 1870. It then discusses the nationalization of the industry in 1956 with the formation of LIC, and its subsequent opening to private players in 2001 with the establishment of IRDA. The key stages and regulations around the evolution of life insurance in India are summarized.
This document provides a 3 paragraph summary of a summer training project report submitted by Sachin Sharma for their BBA degree. The report details Sachin's summer internship project with Hindustan Petroleum Corporation Limited. The report includes sections on the company's mission and vision, history, products and services, refineries, board of directors, and corporate governance practices. The high-level summary is as follows:
The report provides details of Sachin Sharma's summer internship project with Hindustan Petroleum Corporation Limited (HPCL) submitted for their BBA degree. It outlines HPCL's vision to be a world-class energy company and mission to become a fully integrated company in hydrocarbons.
The document discusses entrepreneurship and entrepreneurial management. It defines an entrepreneur as someone who organizes, operates, and assumes the risk of a business venture. Entrepreneurship involves innovation, investment, and expansion into new markets and techniques. The document outlines different theories of entrepreneurship including innovation theory, need for achievement theory, and risk bearing theory. It distinguishes between entrepreneurs and managers and describes different types of entrepreneurs based on economic development, business type, technology, and motivation. Finally, it discusses factors to consider when selecting a business organization type such as sole proprietorship or partnership.
This document summarizes a book by Rashmi Bansal about 25 entrepreneurs who graduated from IIM Ahmedabad and chose entrepreneurship over corporate jobs. It provides background on Bansal, describing her as a journalist and media entrepreneur from Mumbai who graduated from IIM Ahmedabad. The book profiles various entrepreneurs from different industries and regurgitates their quotes. While providing case study material, the poor writing makes the entrepreneurs sound inarticulate. The document also provides a brief biography of Bansal and information about her subsequent books and entrepreneurial ventures including a youth magazine, job portal, and book publishing company. It concludes with a short profile of entrepreneur Sanjeev Bikhchandani, founder of Info Edge
This document provides an overview of project planning and control concepts including the key elements of a project management syllabus. It discusses project definition, identification, feasibility analysis, location, layout, scheduling, cost control, quality control, financing, budgeting, and organization. It defines projects as temporary endeavors with unique goals and characteristics such as objectives, life cycles, uniqueness, teamwork, complexity, risk, customer focus, and changes. Project management is described as applying skills and techniques to meet stakeholder needs and expectations by planning, organizing, controlling, and measuring activities to balance scope, time and cost constraints.
The document discusses different types of organization structures for project management: functional, projectized, and matrix. A functional structure groups employees by specialty area and the functional manager has most authority, while a projectized structure gives full authority to the project manager. A matrix structure combines these by having employees report to both a functional and project manager. The document outlines advantages and disadvantages of each type and notes that the best structure depends on organizational goals and environment.
The project life cycle consists of several phases from initiation to closure. It begins with defining requirements and planning how the work will be completed. This includes establishing the team, scope, schedule and budget. Next is the execution phase where the project plan is implemented by building deliverables, managing risks and changes, and monitoring progress. Finally, the closure phase involves reviewing lessons learned, archiving documents and providing a final report.
The document discusses the process of project identification and screening of project ideas. It involves generating project ideas through methods like SWOT analysis and brainstorming. Ideas are also sourced from analyzing industries, resources, technologies, policies and consumer needs. Projects are preliminarily screened based on compatibility, regulations, inputs, markets, costs and risks. They are rated using a project rating index that weights and scores various factors. Sources of positive net present value include economies of scale, differentiation, costs, reach, technology and policies. Entrepreneurial skills needed include risk-taking, leadership, opportunity exploitation and rational decision-making.
The document discusses project financing. It defines project financing as financing for long-term infrastructure projects based on a non-recourse or limited recourse structure, where debt and equity are paid back through cash flows generated by the project. The key characteristics are financing using debt and equity, repaying debt through project cash flows, limited recourse for sponsors, and securing debt with project assets. Project financing allows off-balance sheet treatment of debt, avoids restrictions on sponsors, and can provide tax benefits. However, it also has higher costs and complexity than corporate financing.
The document discusses the Gujarat International Finance Tec (GIFT) City project in India. Key points:
- GIFT City was envisioned as a world-class financial hub to rival other global cities, but it is facing significant delays due to a lack of proper planning and clearances.
- Several buildings are left incomplete due to issues obtaining permission for heights from the Airport Authority. Additional delays stem from the lack of underground power line clearance.
- The project has not attracted any clients due to an absence of regulatory guidelines, jeopardizing the viability of establishing financial services there.
- Poor coordination between central and state authorities regarding clearances brought the 78,000 crore project to its current
Development financial institutions provide medium and long-term financing to promote key sectors like industry, agriculture, and infrastructure. They include specialized banks like the World Bank, IDBI, SIDBI, and EXIM Bank that offer loans, underwriting, and advisory services. Unlike commercial banks, they do not accept deposits but rather aim to accelerate economic growth and serve public interests. Major development financial institutions were established in India after independence to promote industries and address regional imbalances.
This document outlines the terms and conditions for a rental agreement between John Doe and Jane Smith for the property located at 123 Main St. It specifies the monthly rental rate of $1,000 due on the 1st of each month, the security deposit of $1,000, and the lease term of 1 year beginning January 1st, 2023. The landlord and tenant responsibilities for repairs and maintenance are also defined.
This document outlines the terms and conditions for a rental agreement between John Doe and Jane Smith for the lease of an apartment located at 123 Main St from January 1, 2023 through December 31, 2023. Key details include the monthly rent amount, late fees, repairs and maintenance responsibilities, entry rules, lease termination terms, and signatures from both parties agreeing to the terms.
This document is a scanned receipt from a grocery store purchase on January 15th, 2022 for $58.64. It lists the items bought which include produce, dairy, baked goods, and other grocery items. The payment was made with a credit card ending in 4321.
The document discusses the key concepts of offer and acceptance in contract law. It defines an offer as a proposal made with the intention of obtaining consent. An offer becomes a promise when it is accepted. For an offer to be valid, it must be certain, communicated to the offeree, and not be mistaken as an invitation to treat. Acceptance must be absolute, unambiguous, and communicated to the offeror within a reasonable time period and before the offer lapses or is revoked. Communication of acceptance is complete when it is dispatched, while communication of revocation is complete when received by the other party.
This presentation was provided by Steph Pollock of The American Psychological Association’s Journals Program, and Damita Snow, of The American Society of Civil Engineers (ASCE), for the initial session of NISO's 2024 Training Series "DEIA in the Scholarly Landscape." Session One: 'Setting Expectations: a DEIA Primer,' was held June 6, 2024.
LAND USE LAND COVER AND NDVI OF MIRZAPUR DISTRICT, UPRAHUL
This Dissertation explores the particular circumstances of Mirzapur, a region located in the
core of India. Mirzapur, with its varied terrains and abundant biodiversity, offers an optimal
environment for investigating the changes in vegetation cover dynamics. Our study utilizes
advanced technologies such as GIS (Geographic Information Systems) and Remote sensing to
analyze the transformations that have taken place over the course of a decade.
The complex relationship between human activities and the environment has been the focus
of extensive research and worry. As the global community grapples with swift urbanization,
population expansion, and economic progress, the effects on natural ecosystems are becoming
more evident. A crucial element of this impact is the alteration of vegetation cover, which plays a
significant role in maintaining the ecological equilibrium of our planet.Land serves as the foundation for all human activities and provides the necessary materials for
these activities. As the most crucial natural resource, its utilization by humans results in different
'Land uses,' which are determined by both human activities and the physical characteristics of the
land.
The utilization of land is impacted by human needs and environmental factors. In countries
like India, rapid population growth and the emphasis on extensive resource exploitation can lead
to significant land degradation, adversely affecting the region's land cover.
Therefore, human intervention has significantly influenced land use patterns over many
centuries, evolving its structure over time and space. In the present era, these changes have
accelerated due to factors such as agriculture and urbanization. Information regarding land use and
cover is essential for various planning and management tasks related to the Earth's surface,
providing crucial environmental data for scientific, resource management, policy purposes, and
diverse human activities.
Accurate understanding of land use and cover is imperative for the development planning
of any area. Consequently, a wide range of professionals, including earth system scientists, land
and water managers, and urban planners, are interested in obtaining data on land use and cover
changes, conversion trends, and other related patterns. The spatial dimensions of land use and
cover support policymakers and scientists in making well-informed decisions, as alterations in
these patterns indicate shifts in economic and social conditions. Monitoring such changes with the
help of Advanced technologies like Remote Sensing and Geographic Information Systems is
crucial for coordinated efforts across different administrative levels. Advanced technologies like
Remote Sensing and Geographic Information Systems
9
Changes in vegetation cover refer to variations in the distribution, composition, and overall
structure of plant communities across different temporal and spatial scales. These changes can
occur natural.
How to Setup Warehouse & Location in Odoo 17 InventoryCeline George
In this slide, we'll explore how to set up warehouses and locations in Odoo 17 Inventory. This will help us manage our stock effectively, track inventory levels, and streamline warehouse operations.
A review of the growth of the Israel Genealogy Research Association Database Collection for the last 12 months. Our collection is now passed the 3 million mark and still growing. See which archives have contributed the most. See the different types of records we have, and which years have had records added. You can also see what we have for the future.
How to Build a Module in Odoo 17 Using the Scaffold MethodCeline George
Odoo provides an option for creating a module by using a single line command. By using this command the user can make a whole structure of a module. It is very easy for a beginner to make a module. There is no need to make each file manually. This slide will show how to create a module using the scaffold method.
How to Add Chatter in the odoo 17 ERP ModuleCeline George
In Odoo, the chatter is like a chat tool that helps you work together on records. You can leave notes and track things, making it easier to talk with your team and partners. Inside chatter, all communication history, activity, and changes will be displayed.
Exploiting Artificial Intelligence for Empowering Researchers and Faculty, In...Dr. Vinod Kumar Kanvaria
Exploiting Artificial Intelligence for Empowering Researchers and Faculty,
International FDP on Fundamentals of Research in Social Sciences
at Integral University, Lucknow, 06.06.2024
By Dr. Vinod Kumar Kanvaria
Executive Directors Chat Leveraging AI for Diversity, Equity, and InclusionTechSoup
Let’s explore the intersection of technology and equity in the final session of our DEI series. Discover how AI tools, like ChatGPT, can be used to support and enhance your nonprofit's DEI initiatives. Participants will gain insights into practical AI applications and get tips for leveraging technology to advance their DEI goals.
Executive Directors Chat Leveraging AI for Diversity, Equity, and Inclusion
Ch04 forecasting
1. 4-1
What is Forecasting?What is Forecasting?
♦ Process of predicting a
future event
♦ Underlying basis of
all business decisions
♦ Production
♦ Inventory
♦ Personnel
♦ Facilities
Sales will
be $200
Million!
2. 4-2
♦Short-range forecast
♦ Up to 1 year; usually less than 3 months
♦ Job scheduling, worker assignments
♦Medium-range forecast
♦ 3 months to 3 years
♦ Sales & production planning, budgeting
♦Long-range forecast
♦ 5-10 years
♦ New product planning, facility location
Types of Forecasts by TimeTypes of Forecasts by Time
HorizonHorizon
3. 4-3
Short-term vs. Longer-term ForecastingShort-term vs. Longer-term Forecasting
♦Medium/long range forecasts deal with more
comprehensive issues and support
management decisions regarding planning
and products, plants and processes.
♦Short-term forecasting usually employs
different methodologies than longer-term
forecasting
♦Short-term forecasts tend to be more
accurate than longer-term forecasts.
4. 4-4
Influence of Product Life CycleInfluence of Product Life Cycle
♦Stages of introduction and growth require
longer forecasts than maturity and decline
♦Forecasts useful in projecting
♦ staffing levels,
♦ inventory levels, and
♦ factory capacity
as product passes through life cycle stages
5. 4-5
Strategy and Issues During aStrategy and Issues During a
Product’s LifeProduct’s Life
Introduction Growth Maturity Decline
Standardization
Less rapid product
changes - more minor
changes
Optimum capacity
Increasing stability of
process
Long production runs
Product improvement and
cost cutting
Little product
differentiation
Cost minimization
Over capacity in the
industry
Prune line to eliminate
items not returning good
margin
Reduce capacity
Forecasting critical
Product and process
reliability
Competitive product
improvements and options
Increase capacity
Shift toward product
focused
Enhance distribution
Product design and
development critical
Frequent product and
process design changes
Short production runs
High production costs
Limited models
Attention to quality
Best period to
increase market
share
R&D product
engineering critical
Practical to change
price or quality image
Strengthen niche
Cost control
critical
Poor time to change
image, price, or quality
Competitive costs become
critical
Defend market position
OMStrategy/IssuesCompanyStrategy/Issues
HDTV
CD-ROM
Color copiers
Drive-thru restaurants Fax machines
Station
wagons
Sales
3 1/2”
Floppy
disks
Internet
6. 4-6
Types of ForecastsTypes of Forecasts
♦Economic forecasts
♦ Address business cycle, e.g., inflation rate, money
supply etc.
♦Technological forecasts
♦ Predict technological change
♦ Predict new product sales
♦Demand forecasts
♦ Predict existing product sales
7. 4-7
Seven Steps in ForecastingSeven Steps in Forecasting
♦Determine the use of the forecast
♦Select the items to be forecast
♦Determine the time horizon of the forecast
♦Select the forecasting model(s)
♦Gather the data
♦Make the forecast
♦Validate and implement results
8. 4-8
Product Demand Charted over 4Product Demand Charted over 4
Years with Trend and SeasonalityYears with Trend and Seasonality
Year
1
Year
2
Year
3
Year
4
Seasonal peaks Trend component
Actual
demand line
Average demand
over four years
Demandforproductorservice
Random
variation
9. 4-9
Actual Demand, Moving Average,Actual Demand, Moving Average,
Weighted Moving AverageWeighted Moving Average
0
5
10
15
20
25
30
35
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Month
SalesDemand
Actual sales
Moving average
Weighted moving average
10. 4-10
Realities of ForecastingRealities of Forecasting
♦Forecasts are seldom perfect
♦Most forecasting methods assume that there
is some underlying stability in the system
♦Both product family and aggregated product
forecasts are more accurate than individual
product forecasts
11. 4-11
Forecasting ApproachesForecasting Approaches
♦ Used when situation is
‘stable’ & historical
data exist
♦ Existing products
♦ Current technology
♦ Involves mathematical
techniques
♦ e.g., forecasting sales of
color televisions
Quantitative Methods
♦ Used when situation is
vague & little data exist
♦ New products
♦ New technology
♦ Involves intuition,
experience
♦ e.g., forecasting sales on
Internet
Qualitative Methods
12. 4-12
Overview of Qualitative MethodsOverview of Qualitative Methods
♦Jury of executive opinion
♦ Pool opinions of high-level executives, sometimes
augment by statistical models
♦Sales force composite
♦ Estimates from individual salespersons are
reviewed for reasonableness, then aggregated
♦Delphi method
♦ Panel of experts, queried iteratively
♦Consumer Market Survey
♦ Ask the customer
15. 4-15
Delphi MethodDelphi Method
♦Iterative group
process
♦3 types of people
♦ Decision makers
♦ Staff
♦ Respondents
♦Reduces ‘group-
think’ RespondentsRespondents
StaffStaff
Decision MakersDecision Makers
(Sales?)
(What will
sales be?
survey)
(Sales will be 45, 50, 55)
(Sales will be 50!)
18. 4-18
Quantitative Forecasting MethodsQuantitative Forecasting Methods
(Non-Naive)(Non-Naive)
Quantitative
Forecasting
Linear
Regression
Associative
Models
Exponential
Smoothing
Moving
Average
Time Series
Models
Trend
Projection
19. 4-19
♦ Set of evenly spaced numerical data
♦ Obtained by observing response variable at regular
time periods
♦ Forecast based only on past values
♦ Assumes that factors influencing past and present
will continue influence in future
♦ Example
Year: 1993 1994 1995 1996 1997
Sales: 78.7 63.5 89.7 93.2 92.1
What is a Time Series?What is a Time Series?
25. 4-25
♦Any observed value in a time series is the
product (or sum) of time series components
♦Multiplicative model
♦ Yi = Ti · Si · Ci · Ri (if quarterly or monthly data)
♦Additive model
♦ Yi = Ti + Si + Ci + Ri (if quarterly or mo. data)
General Time Series ModelsGeneral Time Series Models
27. ♦ Another method of this type is the ‘free-hand projection method’. This
includes the plotting of the data series on a graph paper and fitting a
free-hand curve to it. This curve is extended into the future for deriving
the forecasts. The ‘semi-average projection method’ is another naive
method. Here, the time-series is divided into two equal halves, averages
calculated for both, and a line drawn connecting the two semi averages.
This line is projected into the future and the forecasts are developed.
4-27
28. 4-28
♦ The forecasted demand for 1991, using the last period method = actual sales in 1990 = 117 units.
♦ The forecasted demand for 1991, using the free-hand projection method = 119 units. (Please check the
results using a graph papers!)
♦ The semi-averages for this problem will be calculated for the periods 1983-86 and 1987-90. The
resultant semi-averages are 103.75 and 112.75. A straight line joining these points would lead to a
forecast for the year 1991. The value of this forecast will be = 120 units
29. 4-29
♦ MA is a series of arithmetic means
♦ Used if little or no trend
♦ Used often for smoothing
♦ Provides overall impression of data over time
♦ Equation
MAMA
nn
nn
== ∑∑ Demand inDemand in PreviousPrevious PeriodsPeriods
Moving Average MethodMoving Average Method
31. 4-31
Moving Average SolutionMoving Average Solution
Time Response
Yi
Moving
Total
(n=3)
Moving
Average
(n=3)
1995 4 NA NA
1996 6 NA NA
1997 5 NA NA
1998 3 4+6+5=15 15/3 = 5
1999 7
2000 NA
32. 4-32
Moving Average SolutionMoving Average Solution
Time Response
Yi
Moving
Total
(n=3)
Moving
Average
(n=3)
1995 4 NA NA
1996 6 NA NA
1997 5 NA NA
1998 3 4+6+5=15 15/3 = 5
1999 7 6+5+3=14 14/3=4 2/3
2000 NA
33. 4-33
Moving Average SolutionMoving Average Solution
Time Response
Yi
Moving
Total
(n=3)
Moving
Average
(n=3)
1995 4 NA NA
1996 6 NA NA
1997 5 NA NA
1998 3 4+6+5=15 15/3=5.0
1999 7 6+5+3=14 14/3=4.7
2000 NA 5+3+7=15 15/3=5.0
34. 4-34
95 96 97 98 99 00
Year
Sales
2
4
6
8 Actual
Forecast
Moving Average GraphMoving Average Graph
37. 4-37
♦Used when trend is present
♦ Older data usually less important & recent past
periods should be given more weights or
importance
♦Weights based on intuition
♦ Often lay between 0 & 1, & sum to 1.0
♦Equation
WMA =WMA =
ΣΣ(Weight for period(Weight for period nn) (Demand in period) (Demand in period nn))
ΣΣ WeightsWeights
Weighted Moving Average MethodWeighted Moving Average Method
38. ExampleExample
♦ For example, a department store may find that in a four-month
period, the best forecast is derived by using 40 percent of the
actual sales for the most recent month, 30 percent of two months
ago, 20 percent of three months ago, and 10 percent of four
months ago. If actual sales experience was
♦ Month 1 Month 2Month 3Month 4Month5
♦ 100 90 105 95 ?
the forecast for month 5 would be
F5
= 0.40(95) + 0.30(105) + 0.20(90) + 0.10(100)
= 38 + 31.5+ 18+ 10
= 97.5
4-38
39. 4-39
Actual Demand, Moving Average,Actual Demand, Moving Average,
Weighted Moving AverageWeighted Moving Average
0
5
10
15
20
25
30
35
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Month
SalesDemand
Actual sales
Moving average
Weighted moving average
41. 4-41
♦Form of weighted moving average
♦ Weights decline exponentially
♦ Most recent data weighted most
♦Requires smoothing constant (α)
♦ Ranges from 0 to 1
♦ Subjectively chosen
♦Involves little record keeping of past data
Exponential Smoothing MethodExponential Smoothing Method
42. 4-42
♦ Ft = αAt-1+ α(1-α)At-2 + α(1- α)2
·At-3
+ α(1- α)3
At-4 + ... + α(1- α)t-1
·A0
♦ Ft = Forecast value
♦ At = Actual value
♦ α = Smoothing constant
♦ Ft = Ft-1 + α(At-1 - Ft-1) forecast error
♦ Use for computing forecast
Exponential Smoothing EquationsExponential Smoothing Equations
48. 4-48
Y Xi i= ┼a b
♦Shows linear relationship between dependent &
explanatory variables
♦ Example: Sales & advertising (not time)
Dependent
(response) variable
Independent (explanatory)
variable
SlopeY-intercept
^
Linear Regression ModelLinear Regression Model
49. 4-50
♦Slope (b)
♦ Estimated Y changes by b for each 1 unit increase
in X
♦ If b = 2, then sales (Y) is expected to increase by 2 for
each 1 unit increase in advertising (X)
♦Y-intercept (a)
♦ Average value of Y when X = 0
♦ If a = 4, then average sales (Y) is expected to be 4 when
advertising (X) is 0
Interpretation of CoefficientsInterpretation of Coefficients
50. 4-51
♦Variation of actual Y from predicted Y
♦Measured by standard error of estimate
♦ Sample standard deviation of errors
♦ Denoted SY,X
♦Affects several factors
♦ Parameter significance
♦ Prediction accuracy
Random Error VariationRandom Error Variation
51. 4-52
Least Squares AssumptionsLeast Squares Assumptions
♦Relationship is assumed to be linear. Plot
the data first - if curve appears to be present,
use curvilinear analysis.
♦Relationship is assumed to hold only within
or slightly outside data range. Do not
attempt to predict time periods far beyond
the range of the data base.
♦Deviations around least squares line are
assumed to be random.
52. 4-53
Text uses symbol Yc
Standard Error of the EstimateStandard Error of the Estimate
( )
2−
−−
=
2−
−
=
∑ ∑∑
∑
1= 1=1=
2
1=
2
n
yxbyay
n
yˆy
S
n
i
n
i
iii
n
i
i
n
i
ii
x,y
53. 4-54
♦Answers: ‘how strong is the linear relationship
between the variables?’
♦Coefficient of correlation Sample correlation
coefficient denoted r
♦ Values range from -1 to +1
♦ Measures degree of association
♦Used mainly for understanding
CorrelationCorrelation
54. 4-55
Sample Coefficient of CorrelationSample Coefficient of Correlation
−
−
−
=
∑ ∑∑ ∑
∑ ∑ ∑
1=
2
1=
2
1=
2
1=
2
1= 1= 1=
n
i
n
i
ii
n
i
n
i
ii
n
i
n
i
n
i
iiii
yynxxn
yxyxn
r
55. 4-57
♦You want to achieve:
♦ No pattern or direction in forecast error
♦ Error = (Yi - Yi) = (Actual - Forecast)
♦ Seen in plots of errors over time
♦ Smallest forecast error
♦ Mean square error (MSE)
♦ Mean absolute deviation (MAD)
Guidelines for SelectingGuidelines for Selecting
Forecasting ModelForecasting Model
^
At this point, it may be useful to point out the “time horizons” considered by different industries. For example, some colleges and universities look 30 to fifty years ahead, industries engaged in long distance transportation (steam ship, railroad) or provision of basic power (electrical and gas utilities, etc.) also look far ahead (20 to 100 years). Ask them to give examples of industries having much shorter long-range horizons.
At this point it may be helpful to discuss the actual variables one might wish to forecast in the various time periods.
This slide introduces the impact of product life cycle on forecasting The following slide, reproduced from chapter 2, summarizes the changing issues over the product’s lifetime for those faculty who wish to treat the issue in greater depth.
One can use an example based upon one’s college or university. Students can be asked why each of these forecast types is important to the college. Once they begin to appreciate the importance, one can then begin to discuss the problems. For example, is predicting “demand” merely as simple as predicting the number of students who will graduate from high school next year (i.e., a simple counting exercise)?
A point to be made here is that one requires a forecasting “plan,” not merely the selection of a particular forecasting methodology.
This slide illustrates a typical demand curve. You might ask students why it is important to know more than simply the actual demand over time. Why, for example, would one wish to be able to break out a “seasonality” factor?
This slide illustrates one of the simplest forecasting techniques - the moving average. It may be useful to point out the lag introduced by exponential smoothing - and ask how one can actually make use of the forecast.
This slide provides a framework for discussing some of the inherent difficulties in developing reliable forecasts. You may wish to include in this discussion the difficulties posed by attempting forecast in a continuously, and rapidly changing environment where product life-times are measured less often in years and more often in months than ever before.
One might wish to emphasize the inherent difficulties in developing reliable forecasts.
This slide distinguishes between Quantitative and Qualitative forecasting. If you accept the argument that the future is one of perpetual, and perhaps significant change, you may wish to ask students to consider whether quantitative forecasting will ever be sufficient in the future - or will we always need to employ qualitative forecasting also. (Consider Tupperware’s ‘jury of executive opinion.’)
This slide outlines several qualitative methods of forecasting. Ask students to give examples of occasions when each might be appropriate.
The next several slides elaborate on these qualitative methods.
Ask your students to consider other potential disadvantages. (Politics?)
You might ask your students to consider what problems might occur when trying to use this method to predict sales of a potential new product.
You might ask your students to consider whether there are special examples where this technique is required. ( Questions of technology transfer or assessment, for example; or other questions where information from many different disciplines is required.)
You might discuss some of the difficulties with this technique. Certainly there is the issue that what consumers say is often not what they do. There are other problems such as that consumers sometime wish to please the surveyor; and for unusual, future, products, consumers may have a very imperfect frame of reference within which to consider the question.
A point you may wish to make here is that only in the case of linear regression are we assuming that we know “why” something happened. General time-series models are based exclusively on “what” happened in the past; not at all on “why.” Does operating in a time of drastic change imply limitations on our ability to use time series models?
This and subsequent slide frame a discussion on time series - and introduce the various components.
This slide introduces two general forms of time series model. You might provide examples of when one or the other is most appropriate.
This slide introduces the naïve approach. Subsequent slides introduce other methodologies.
At this point, you might discuss the impact of the number of periods included in the calculation. The more periods you include, the closer you come to the overall average; the fewer, the closer you come to the value in the previous period. What is the tradeoff?
This slide shows the resulting forecast. Students might be asked to comment on the useful ness of this forecast.
This slide introduces the “weighted moving average” method. It is probably most important to discuss choice of the weights.
This slide illustrates one of the simplest forecasting techniques - the moving average. It may be useful to point out the lag introduced by exponential smoothing - and ask how one can actually make use of the forecast.
These points should have been brought out in the example, but can be summarized here.
This slide introduces the exponential smoothing method of time series forecasting. The following slide contains the equations, and an example follows.
You may wish to discuss several points:
- this is just a moving average wherein every point in included in the forecast, but the weights of the points continuously decrease as they extend further back in time.
- the equation actually used to calculate the forecast is convenient for programming on the computer since it requires as data only the actual and forecast values from the previous time point.
- we need a formal process and criteria for choosing the “best” smoothing constant.
This slide begins an exponential smoothing example.
This slide illustrates the result of the steps used to make the forecast desired in the example. In the PowerPoint presentation, there are additional slides to illustrate the individual steps.
This slide illustrates graphically the results of the example forecast.
This slide introduces the linear regression model. This can be approached as simply a generalization of the linear trend model where the variable is something other than time and the values do not necessarily occur a t equal intervals.
This slide probably merits discussion - additional to that for the linear trend model.
You might make the point here that the dependent and independent variable are not necessarily of the same nature - they need not both be dollars, for example.
You might also wish to note that setting x = 0 may not have a useful physical interpretation.
Here you may wish to at least begin the discussion of the distinction between explainable and unexplainable, and random and non-random error variation. There are also slides which come later in the presentation that will refer to this topic.
This slide raises several points:
- What does it mean to be “linear”? How does one tell if something is linear or not? Or perhaps, how does one tell if something is sufficiently linear that a linear regression model is appropriate?
- If the relationship is assumed to hold only within or slightly outside the data range, how do we use this model to make projections into the future (for which we don’t have data)?
- What does it mean for data to be random? How can we tell? You might discuss making scatter plots not only of the original data, but also of the resulting deviations. (Obviously there are more rigorous methods of determining if the deviations are random, but a scatter plot is a good start.)
Again, it is probably useful to point out which elements in the equations represent the actual data values and which the averages of these values.
This slide can frame the start of a discussion of correlation.. You should probably expect to add to this a discussion of cause and effect, emphasizing in particular that correlation does not imply a cause and effect relationship. Ask student to suggest examples of significant correlation of unrelated phenomenon.
Here again an explanation of each variable is probably useful.
While this slide introduces the implications of negative and positive correlation, it is probably also a good point to re-emphasis the difference between correlation and cause and effect.
This slide introduces overall guideline for selecting a forecasting model. You may also wish to re-emphasize the role of scatter plots, and discuss the role of “understanding what is going on” (especially in limiting one’s choice of model).
This slide illustrates both possible patterns in forecast error, and the merit of making a scatter plot of forecast error.