Chapter 8 Flashcards
It is the art and science of predicting future events to make informed business decisions, often using a combination of mathematical methods and intuition.
operations management
three forecasting time horizons
Short-range, Medium-range, Long-range
Forecasting Time Up to 3 months; for immediate planning like hiring and purchases.
Short-range
Forecasting Time 3 months to 3 years; for budgeting and sales planning.
Medium-range
Why is accurate forecasting strategically important?
It helps manage workforce and capacity effectively, minimizes costs, improves customer satisfaction, and maintains market competitiveness.
Forecasting Time 3+ years; for strategic decisions like new product development.
Long-range
What are the two main forecasting approaches?
Qualitative, Quantitative
Forecasting methods based on intuition, experience, and judgment, including Jury of Executive Opinion, Delphi Method, Sales Force Composite, and Consumer Market Surveys.
Qualitative
Methods that rely on mathematical and statistical models, including Time Series Models and Associative Models.
Quantitative
What is the significance of demand forecasting?
It estimates consumer demand, guiding production levels, inventory, and resource allocation.
How do technological forecasts impact operations management?
By identifying trends in technology, they enable businesses to innovate and create new products or improve processes.
A forecasting technique where the next period’s forecast equals the most recent actual value.
Naïve Method
A quantitative forecasting method that uses historical data patterns to predict future outcomes.
time series model
It gathers input from decision-makers, staff, and respondents in iterative rounds to refine forecasts.
Delphi Method
A forecasting method that assigns more weight to recent data points, using a smoothing factor
𝛼
exponential smoothing
An associative model analyzing the linear relationship between independent and dependent variables to predict outcomes.
linear regression
A forecasting method where sales staff provide estimates, reviewed for realism and aggregated into a total forecast.
sales force composite
Predictions related to economic indicators like housing starts and inflation rates
economic forecasts
It assumes that historical patterns in data will continue into the future.
trend projection
A forecasting approach where prospective customers are surveyed to estimate demand for products.
consumer market survey
To smooth out short-term fluctuations and highlight longer-term trends in data.
moving averages
A qualitative forecasting method where high-level experts and management provide their judgment to predict future events.
Jury of Executive Opinion
The process of determining the capacity needed by an organization to meet future demands, influenced heavily by forecasts.
capacity planning
Predictions about the rate of technological progress and trends, enabling organizations to innovate and create new products.
technological forecasts
A quantitative forecasting method that uses relationships between variables, such as through linear regression, to predict outcomes.
Associative Model
Projections of customer demand for a product or service, crucial for supply chain and operations planning.
demand forecasts
