Chs 4 and whatever Flashcards
Forecasting
Is the art and science of predicting future events
Short-Range Forecast
Generally less than three months. Utilize more mathematical techniques like exponential smoothing, and tend to be the most accurate form of forecasting.
Medium-Range Forecast
Generally between three months and 3 years.
Long-Range Forecast
Generally greater than 3 years. Deal with more comprehensive issues supporting management decisions.
Economic Forecasts
Address the business cycle by predicting inflation rates, money supplies housing starts and other planning indicators.
Technological Forecasts
Are concerned with rates of technological progress, which can result in the birth of exciting new products, requiring new plants and equipment.
Demand Forecasts
Projections of demand for a company’s products or services.
What is the only estimate of demand until actual demand is known?
The forecast
Product demand forecast affects three things:
Supply-chain management, human resources, and capacity.
Qualitative Methods:
Jury of Executive Opinion, Delphi Method, Sales Force Composite, and Market Survey.
Quantitative Methods:
Naive Approach, Moving Averages, Exponential Smoothing, Trend Projection, Linear Regression
The four components of a time series:
Trend, seasonality, cycles and random variations.
Moving Averages present three problems:
Increasing N makes the method less sensitive to changes in the data, moving averages can’t pick up trends well and moving averages require extensive records of past data.
Exponential Smoothing equation:
Last period’s forecast + smoothing constant (last period’s actual demand - last period’s forecast)
Equation for MAD:
summation of actual minus forecasted, over n
