Chapter Five Flashcards
What is Dependent Demand?
Finished Goods
What is Independent Demand?
Raw Materials, Component Parts, Sub-assemblies, etc.
Qualitative forecasting
Based on opinion and intuition. Generally used when data are limited, unavailable, or not currently relevant.
Quantitative Forecasting
Uses mathematical models and historical data. Historical data is used to predict future demand.
Qualitative forecasting methods
- Jury of executive opinion
- Delphi method
- Sales force composite
- Consumer survey
What is Jury of executive opinion?
Group of senior management executives who are knowledgeable about their markets, competitors, and the business environment collectively develop the forecast
What is Delphi Method?
Delphi method: Group of internal and external experts are surveyed during several rounds in terms of future events and long-term forecasts of demand, to develop a forecast. Benefit of the delhpi method: less bias.
Steps of Delphi Method
l. Choose the experts to participate. There should be a variety of knowledgeable people in different areas.
2. Through a questionnaire (or E-mail), obtain forecasts (and any premises or qualifications for the forecasts) from all participants.
3. Summarize the results and redistribute them to the participants along with appropriate new questions.
4. Summarize again, refining forecasts and conditions, and again develop new questions.
5. Repeat Step 4 if necessary. Distribute the final results to all participants.
What is Sales Force Composite?
Forecast is based on the sales force’s knowledge of the market and estimates of customer needs. Problem with Sales Force composite: sand bagging. Under forecast.
What is a consumer survey?
Forecasts are developed from the results surveying customers on future purchasing needs, new product ideas and opinions about existing or new products
Quantitative Methods
- Time series forecasting
2. Cause & Effect forecasting
What is Time series forecasting?
Based on the assumption that the future is an extension of the past. Historical data is used to predict future demand
What is Cause and Effect Forecasting?
Assumes that one or more factors (independent variables) predict future demand
What is Naive Forecasting
the estimate of the next period is equal to the demand in the past period.
What is Collaborative Planning, Forecasting, and Replenishment (CPFR)?
A tool used to coordinate demand forecasting, production and purchase planning, and inventory replenishment between supply chain trading partners.
