*Chapter 5: Forecasting

Question 1

What is operations forecasting

Answer 1

The process of predicting the future demand of product or services. Forecasting is the preface to planning

Question 2

What is the goal of forecasting

Answer 2

It is to improve efficiency, effectiveness, and reduce costs.
Enables operations managers to plan the production levels and make informed and calculated decisions

Question 3

What areas does forecasting address

Answer 3

• broad spectrum commerce and monetary circumstances
• competitiveness of organisations measured against competitors
• marketplace tendencies (i.e. new products)
• sourcing of money needed for marketing, sponsorship and product development

Question 4

What does forecasting involve

Answer 4

Forecasting involves taking historical data and projecting the data into the future using mathematical models.

These methods may be subjective (outcome influenced by the person doing the forecast) or objective (influenced by the available data).

Question 5

Name the time horizons for doing forecasts (pg 113)

Answer 5

1. Short-range horizon/period
2. Medium-range horizon/period
3. Long-range horizon/period

Question 6

Explain the short-range horizon/period

Answer 6

Anything from a few weeks to 12 months.

Used for planning purchasing transactions, scheduling of jobs, measures to ensure a level workforce, cash requirements and correct levels of production.

Question 7

Explain the medium-range horizon/period

Answer 7

Anywhere between 12 months and 5 years.

Used for planning of sales plans, production plans, capacity plans, operating cash budgets

Question 8

Explain the long-range horizon/period

Answer 8

This is usually FROM 5 years upwards.

Used in the planning of new products, new capital expansion projects, location of new facilities and research, and development

Question 9

View table for details of forecasts used for operations decisions

Answer 9

Page 113 or
Slide 8

Question 10

View table for details of forecasts used for marketing, HR and finance decisions

Answer 10

Page 113 or
Slide 9

Question 11

State the requirements of an accurate forecast

Answer 11

-Should be reliable
-Should be accurate
-Should be timely
-Should be cost-effective
-Should be in writing
-Should be done in meaningful units
-Techniques must be simple to use and understand

Question 12

Name the 6 steps to be followed in the preparation of a forecast (page 115)

Answer 12

Step 1: determine the purpose of the forecast

Step 2: find the correct time frame

Step 3: select the correct technique (either qualitative or quantitative or a combination of them both)

Step 4: gather and analyse data (assumptions should be clearly stated)

Step 5:make the forecast

Step 6: constantly monitor the forecast (to ensure compliance)