chapter 4 flashcards
what are the two types of forecasts?
- qualitative
- quantitative
what are some advantages of Forecasting ?
- basis for corporate long run planning
- used for financial budgeting
- used for sales planning
- it is input for Production Planning
- vital for every significant business decision
what are the disadvantages for Forecasting ?
- never 100% accurate
- costs a lot of money
- collection and collating of information should be done correctly
- proper information is not always available
- some companies invest too much effort into forecasting, but neglect to become more agile and respond quicker to changes in the market preferences and demand
what are the components of Demand?
- average demand for a period of time
- trend
- seasonal element
- cyclical elements
- random variation
what is a Time Series Analysis and bhwo do you pick the models?
Time Series Analysis: they try to predict future based on past data
You can pick models based on…
- time horizon to forecast
- data availability
- accuracy required
- size of forecasting budget
- availability of qualified personal
whats the difference between SMA and WMA?
- while the simple moving average formula implies an equal weight being placed on each value that is being averaged
- the weighted moving average permits an unequal weighing on prior time periods
what do larger and smaller “a” values mean in Forecasting?
- larger “a” values emphasize recent levels of demand and result inn forecasts more responsive to change
- smaller “a” values result in more stable forecasts
when dp we use Qualitative Forecasting Models and what is their purpose?
- used when adequate past data are lacking, such as when a new product is introduced, or technology is expected to change
- helps to modify forecasts generated by quantitative methods
- these methods are subjective, judgmental and based on estimates, gut feels and opinions
they smaller the error…?
the more accurate the model is
what are Qualitative Forecasting Models and what is their purpose?
- used when adequate past data are lacking, such as when a new product is introduced, or technology is expected to change
- helps to modify forecasts generated by quantitative methods
- these methods are subjective, judgmental, and based on estimates, gut feels and opinions
how is Simple Moving Average helpful?
assumes an average that’s a good estimator of future behaviour
what happens when SMA has a large number of periods?
the more conservative (less dynamic) the forecast is
(the same is said for WMA)
what’s the ideal MAD?
it’s zero. this means theirs no forecasting error.
the larger the MAD, the less the desirable the resulting model is
list the steps of the Delphi Method?
- choose the experts to participate. there should be a variety of knowledgable people in different areas
- through q quesstionare (or e-mail), obtain forecasts (and any premises or qualification for the forecasts) from all participants
- summarize the results and redistribute them to the participants along with appropriate new questions
- summarize again, refining forecasts and conditions, and again develop new questions
- repeat step 4 if necessary. distribute the final results to all participants
