Chapter 4

Question 1

Process of predicting a future event. It is the underlying basis of all business decisions.

Answer 1

Forecasting

Question 2

3 forecasting time horizons:

Answer 2

Short range, medium range and long range.

Question 3

Up to 1 year, generally less than 3 months. Used for purchasing, job scheduling, job assignments etc.

Answer 3

Short range forecast

Question 4

3 months to 3 years, sales and production planning, budgeting.

Answer 4

Medium range forecast

Question 5

3+ years, new product planning, facility location, research and development.

Answer 5

Long-range forecast

Question 6

___ and ____ require longer forecasts than maturity and decline.

Answer 6

introduction and growth

Question 7

addressing business cycle- inflation rate, money supply, housing starts, etc.

Answer 7

economic forecasts

Question 8

predict rate of technological progress; impacts development of new products

Answer 8

technological forecasts

Question 9

predict sales of existing products and services.

Answer 9

demand forecasts

Question 10

seven steps in forecasting:
1. determine the use
2. Select the items to be forecasted
3. Determine the time horizon of the forecast
4. Select the forecasting models
5. gather the data needed
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Answer 10

6. Make the forecast

7. Validate and implement the results

Question 11

method of forecasting used when situation is vague and little data exist; involves intuition, experience

Answer 11

qualitative methods

Question 12

method of forecasting used when situation is ‘stable’ and historical data exist; involves mathematical techniques

Answer 12

quantitative methods

Question 13

Qualitative method that pool opinions of high-level experts and managers, combines managerial experience with statistical models. It is relatively quick, but had the group think disadvantage.

Answer 13

jury of executive opinion

Question 14

Qualitative method that uses a panel of experts, iterative group process that continues until consensus is reached. Has three types of participants: decision makers, staff and respondents.

Answer 14

delphi method

Question 15

Qualitative method, each salesperson projects their sales. Combined at district and national levels, sales reps know customer wants and may be overly optimistic.

Answer 15

sales force composite

Question 16

set of evenly spaced numerical data. forecast based only on past values, no other variables important

Answer 16

time-series forecasting

Question 17

Four types of time-series components:

Answer 17

trend, seasonal, cyclical and random.

Question 18

persistent, overall upward or downward pattern. changes due to population, technology, age, culture, etc. typically several years duration.

Answer 18

trend component

Question 19

regular pattern of up and down fluctuations. due to weather, customs, etc. occurs within a single year.

Answer 19

seasonal component

Question 20

repeating up and down movements, affected by business cycle, political, and economic factors. multiple years duration.

Answer 20

cyclical component

Question 21

erractic, unsystematic, residual fluctuations. due to random variation or unforeseen events.

Answer 21

random component

Question 22

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

Answer 22

naive approach

Question 23

patterns in the data that occur every several years.

Answer 23

cycles.

Question 24

Forecasts are useful in projecting staffing levels, inventory levels and

Answer 24

Factory capacity

Question 25

Qualitative method that asks the customer about purchasing plans. Useful for demand product design and planning, what consumers say and what they do may be different, may be overly optimistic.

Answer 25

Market survey

Question 26

Series of artithmetoc means, used if little or no trend. Used often for smoothing.

Answer 26

Moving average.