CHAPTER 3 Flashcards
are a basic input in the decision processes of
operations management because they
provide information on future demand.
Forecasts
pertain to new products or services, new
equipment, new facilities, or something else
that will require a somewhat long lead time to
develop, construct, or otherwise implement.
Long-term forecasts
Usually, a certain amount of time is needed
to respond to the information contained in a
forecast.
Timely
and the degree of accuracy should be stated.
This will enable users to plan for possible
errors and will provide a basis for comparing
alternative forecasts
Accurate
it should work consistently. A technique that
sometimes provides a good forecast and
sometimes a poor one will leave users with
the uneasy feeling that they may get burned
every time a new forecast is issued.
Reliable
Financial planners need to know how many
dollars will be needed, production planners
need to know how many unitswill be needed,
and schedulers need to know what machines
and skills will be required. The choice of units
depends on user needs.
Meaningful units
Meaningful units
Cost-effective
that use subjective inputs such as opinions
from consumer surveys, sales staff,
managers, executives, and experts.
Judgmental forecasts Forecasts
Forecasts that project patterns identified in
recent time-series observations.
Time-series forecasts
Forecasting technique that uses explanatory
variables to predict future demand.
Associative model
A time-ordered sequence of observations
taken at regular intervals.
Time series
A forecast for any period that equals the
previous period’s actual value.
Naive forecast
Technique that averages a number of recent
actual values, updated as new values
become available.
Moving average
