Forcasting Flashcards
Forcast
A prediction of future events used for planning purposes
Demand
A prediction of future demand by analyzing past demand patterns to make predictions
Time series
The repeated observations of demand for a service or product in their order of occurrence
What are the 5 basic time series patterns?
Horizontal, Trend, Seasonal, Cyclical, Random
Horizontal
Data cluster about a horizontal line
Trend
Data consistently increasing or decreasing
Seasonal
Data consistently shows peaks and valleys
Cyclical
Data reveals gradual increases or decreases over extended periods
Random
No pattern
Demand Management
Process of changing demand patterns using one or more demand options
Demand Options
Complementary products, promotional pricing, prescheduled appointments, reservations, revenue management, backlogs, backorders & stockouts
What are the four demand forecasting methods?
Judgement methods, causal methods, time-series analysis, trend projection using regression
Naive forecast
The forecast for the next period equals the demand for the current period (Forecast=Dt)
Horizontal patterns - Estimating the average
Simple moving average
Moving Average
sum of last n demands/n
Linear regression
Y=mx+b (x=independent variable, y=dependent variable)
Sample correlation coefficient
r - Measures strength and direction of relationship between IV & DV (-1<=r<=1)
Sample coefficient of determination
r^2 - Measures amount of variation in the DV about its mean that is explained by regression line (0<=r<=1)
Inventory management
The planning and controlling of inventories to meet the
competitive priorities of the organization.
3 metrics of inventory mgmt
Customer service, Inventory costs, Operational performance
3 types of inventory
Raw material, WIP, Finished goods
Cycle inventory
The portion of total inventory that varies directly with order size
Safety stock
Surplus inventory that protects against uncertainties in demand, lead time, and supply changes.
3 Inventory costs
Holding/carrying cost, ordering cost, setup cost
Holding/carrying cost
The cost of holding or “carrying” an item in inventory over time
including costs to finance the inventory, maintain storage
facilities, rent, utilities, taxes, and insurance.
Ordering cost
The fixed costs of systems and labor required to place, receive,
and audit a replenishment order. Transportation costs might be
included if it’s fixed per order.
Setup cost
Cost to prepare a machine or process for manufacturing an
order. This includes time and labor to clean and change tools.
