Forecasting

Question 1

What is ERP?

Answer 1

Enterprise resource planning (ERP) systems are large, integrated, computer-based business transaction processing and reporting systems.

Question 2

Why do we use ERP systems?

Answer 2

The primary advantage of ERP systems is that they pull together all of the classic business functions, such as accounting, finance,
sales, and operations, into a single, tightly integrated package that uses a common database.

Question 3

What is a Forecast?

Answer 3

An estimate of the future level of some variable.

Question 4

Forecasting is used to determine:

Answer 4

• Long-term capacity needs
• Yearly business plans
• Shorter-term operations and supply chain activities

Question 5

Forecast Types

Answer 5

1. Demand
2. Supply
3. Price

Question 6

What is a demand forecast?

Answer 6

• Overall market demand
• Firm-Level demand

Question 7

What is a supply forecast?

Answer 7

• Number of current producers and suppliers
• Projected aggregate supply levels
• Technological and political trends that might affect supply

Question 8

What is a price forecast?

Answer 8

Forecast prices for key materials and services

Question 9

What are the 4 laws of forecasting?

Answer 9

Law 1: Forecasts Are Almost Always Wrong (But They Are Still Useful).
Law 2: Forecasts for the Near Term Tend To Be More Accurate.
Law 3: Forecasts for Groups of Products or Services Tend to Be More Accurate.
Law 4: Forecasts Are No Substitute For Calculated Values.

Question 10

What are qualitative forecasting techniques?

Answer 10

Forecasting techniques based on intuition or informed opinion.
- Used when data are scarce, not available, or irrelevant.

Question 11

What are quantitative forecasting models?

Answer 11

Forecasting models that use measurable or historical data to generate forecasts.

Question 12

Examples of qualitative forecasting methods

Answer 12

• Market surveys
• Panel consensus forecasting
• Delphi method
• Life-cycle analogy method
• Build-up forecasts

Question 13

What are market surveys?

Answer 13

Structured questionnaires submitted to potential customers

Question 14

What is panel consensus forecasting?

Answer 14

Experts come together to develop forecasts

Question 15

What is the Delphi method?

Answer 15

Experts work individually to develop forecasts

Question 16

What is the life-cycle analogy method?

Answer 16

Identify the time frames and demand levels of different stages of a new product or service

Question 17

What are build-up forecasts?

Answer 17

Experts familiar with specific market segments estimate the demand within these segments

Question 18

What are Time Series Forecasting Methods?

Answer 18

A quantitative forecasting model that uses a time series to develop forecasts.

Question 19

What is a time series?

Answer 19

A series of observations arranged in chronological order

Question 20

What are demand patterns?

Answer 20

• Randomness
• Trend
• Seasonality

Question 21

What is randomness?

Answer 21

Unpredictable movement from one time period to the next.

Question 22

What is a trend?

Answer 22

Long-term movement up or down in a time series.

Question 23

What is seasonality?

Answer 23

A repeated pattern of spikes or drops in a time series associated with certain times of the year.

Question 24

What is the Last Period Model?

Answer 24

The simplest time series model which uses demand for the current period as a forecast for the next period.

Question 25

What is the Moving Average Model?

Answer 25

A time series forecasting model that derives a forecast by taking an average of recent demand values.

Question 26

What is the Weighted Moving Average Model?

Answer 26

A form of the moving average model that allows the actual weights applied to past observations to differ.

Question 27

What is Linear Regression?

Answer 27

• A statistical technique that expresses a forecast variable (y) as a linear function of some independent variable. (x)
• Can be used to develop time series and causal forecasting models.

Question 28

What are Causal Forecasting Models?

Answer 28

A class of quantitative forecasting models in which the forecast is modeled as a function of something other than time.
- Linear Regression
- Multiple Regression

Question 29

What is Collaborative Planning, Forecasting, and Replenishment (CPFR)?

Answer 29

A set of business processes, backed up by information technology, in which supply chain partners agree to mutual business objectives and measures, develop joint sales and operational plans, and collaborate to generate and update sales forecasts and replenishment plans.