Chapter 4: Forecasting

Question 1

Main purpose of forecasting

Answer 1

making good estimates

Question 2

a prediction of what will happen in the future

Answer 2

forecast

Question 3

is a set of observations measured at successive points in, or over successive periods of, time.

Answer 3

time series

Question 4

objective of time series methods

Answer 4

discover a pattern in the
historical data and then extrapolate this pattern into the future.

Question 5

Important uses of forecasting to managers

Answer 5

-help them plan the system
-help them plan the use of system

Question 6

long-range set of plans (what facilities and equipment to have, where to locate, concerning what types of products of service to offer)

Answer 6

Planning the system

Question 7

usually shorter and intermediate range planning (planning inventory, purchasing, production, budgeting, scheduling)

Answer 7

Planning the use of system

Question 8

part and a science of predicting future events (can help managers by reducing some of uncertainties)

Answer 8

Forecasting

Question 9

not just predicting demand, it also used to predict profit, sales, costs, productivity changes, prices, availability of raw materials, interest rates, prices of stock and bonds, and movements of economic decisions

Answer 9

Business Forecasting

Question 10

GDP, GNP, inflation, economic borrowing among others

Answer 10

Economic Decisions

Question 11

Forecasting Process

Answer 11

1. Determine the purpose of the forecast
2. Establish a time horizon that the forecast must cover
3. Select a forecasting method
4. Gather and analyze the appropriate data and then prepare the forecast
5. Monitoring the forecast to correct the accuracy for future use.

Question 12

Approaches to Forecasting

Answer 12

-Qualitative Forecasting
-Quantitative Forecasting

Question 13

judgement obtained from various sources such as consumer surveys, sales, staff, managers, executives, even the management consultants, and various panel of experts

Answer 13

Qualitative Forecasting

Question 14

Qualitative Forecasting includes…

Answer 14

-Executive Opinions
-Sales Force
-Customer Surveys
-Opinions of Manager and Staff

Question 15

often used as a part of long-range planning and new product development

Answer 15

Executive Opinions

Question 16

direct contact with the customers; effective way to forecast judgmentally

Answer 16

Sales Force

Question 17

contact information that might not be available elsewhere

Answer 17

Customer Surveys

Question 18

may solicit from a number of other managers and from their staff or may concern advice on political or economic decisions

Answer 18

Opinions of Manager and Staff

Question 19

based on historical database on numbers

Answer 19

Quantitative Forecasting

Question 20

Quantitative Forecasting includes…

Answer 20

-Time Series
-Latin Forecast

Question 21

simplest forecasting technique

Answer 21

Latin Forecast

Question 22

Advantage of Latin Forecast

Answer 22

has virtually no cost; quickly and easy to prepare

Question 23

Disadvantage of Latin Forecast

Answer 23

mobility to provide highly accurate forecast

Question 24

for fairly stable components and to average out the irregular components of the time series

Answer 24

Smoothing Methods

Question 25

computing an average of the most recent n data values in the time series and using this average for forecasting the value of the time series for the next period

Answer 25

Moving Averages

Question 26

computing the average of the most recent n periods, the more recent observations are typically given more weight than older observations.

Answer 26

Weighted Moving Averages

Question 27

most widely used techniques in forecasting

Answer 27

Exponential Smoothing

Question 28

new forecast is based on the previous forecast plus percentage of the difference between that forecast and the actual value of the series at that point

Answer 28

Exponential Smoothing

Question 29

Ft+1=

Answer 29

forecast of the time series for period t+1

Question 30

Yt=

Answer 30

actual value of the time series in period t

Question 31

Ft=

Answer 31

forecast of the time series for period t

Question 32

a=

Answer 32

smoothing constant

Question 33

determines how the historical time series values are weighted

Answer 33

smoothing constant