Chapter 4

Question 1

forecasting

Answer 1

process of predicting a future event

Question 2

short range forecast

Answer 2

• up to 1 year, generally less than 3 months
• purchasing, job scheduling, workforce levels
• tend to be most accurate

Question 3

medium range forecast

Answer 3

• 3 months to 3 years

- sales and production planning, budgeting

Question 4

long range forecast

Answer 4

• 3+ years
• new product planning, facility location, research and development
• introduction and growth (product life cycle) require longer forecasts than maturity and decline

Question 5

types of forecasts (3)

Answer 5

economic, technological, demand

Question 6

economic forecasts

Answer 6

money supply, inflation rate..

Question 7

technological forecasts

Answer 7

predict rate of technological progress, impacts development of new products

Question 8

demand forecasts

Answer 8

predict sales of existing products and services

Question 9

7 steps in forecasting

Answer 9

1. determine the use of the forecast
2. select the items to be forecasted
3. deterring the time horizon of the forecast
4. select the forecasting models
5. gather the data
6. make the forecast
7. validate and implement results

Question 10

qualitative methods (4)

Answer 10

1. Jury of executive opinion
2. delphi method
3. sales force composite
4. market survey

Question 11

jury of executive opinion

Answer 11

group of high level experts

Question 12

delphi method

Answer 12

using a group (decision makers, staff and respondents) that allows experts to make forecasts

Question 13

sales force composite

Answer 13

salespersons estimates of expected sales

Question 14

market survey

Answer 14

asking the customer

Question 15

quantitative methods (3)

Answer 15

time series, naive approach, moving average method

Question 16

time series

Answer 16

uses a series of past data points to make a forecast components:

trend: changes due to population, technology
cyclical: business cycle, political, economical
seasonal: weather, customs
random: natural disasters

Question 17

naive approach

Answer 17

assumes demand in next period is the same as demand in the most recent period

Question 18

moving average method

Answer 18

used if little or no trend, provides overall impression of data over time

moving average = (sum of demand in previous n periods) / n

Question 19

weighted moving average

Answer 19

weights based on experience and intuition

weighted moving average = [(sum of weight for period n) x (demand in period n)] / sum of weights

Question 20

season index formula

Answer 20

season index = expected annual demand / 12 x index