Forecasting Flashcards
2 important uses of Forecasting
- Planning the system - longer
- Planning the use of the system - shorter
A prediction of what will happen in the future.
Forecast
A set of observations measured at successive points in, or over successive periods of time. Most used Quantitative Forecast.
Time Series
3 common smoothing methods
A. Moving Averages
B. Weighted Moving Averages
C. Exponential Smoothing
Steps on Forecasting
- Determine the purpose of the forecast
- Establish a time horizon
- Select a forecasting method
- Gather and analyze the appropriate data and prepare the forecast
- Monitor the forecast
Based on judgement and mere opinions. Also called Judgemental Forecast.
Qualitative Forecasting
Based on historical data or numbers.
Quantitative Forecast
Simplest forecasting technique. The demand last week is the demand for this week.
Naive Forecast
Consists of computing an average of the most recent n data values in the series and using this average for forecasting the value of the time series for the next period.
Moving averages
Formula for Moving Average
Summation of most recent n data divided by n
Computing the average of the most recent n periods, the more recent observations are typically given more weight than older observations.
Weighted Moving Averages
The biggest weight will be given to the blank point. In weighted moving averages.
recent
It is one of the most widely used techniques in forecasting. Each new forecast is based on the previous forecast plus percentage of the difference between that forecast and the actual value of the series at that point.
Exponential smoothing
Determines how the historical time series values are weighted. The higher the smoothing constant, the greater the weight assigned to the values from the latest period.
Smoothing constant
Exponential smoothing formula
Ft+1=aYt+(1-a)Ft
