Forecasting Flashcards
Process of predicting a future event
Forecasting
Underlying basis of all business decisions
Production
Inventory
Personnel
Facilities
Up to 1 year; usually less than 3 months
Job scheduling, worker assignments
Short-range forecast
3 months to 3 years
Sales & production planning, budgeting
Medium-range forecast
3+ years
New product planning, facility location
Long-range forecast
Address business cycle, e.g., inflation rate, money supply etc.
Economic forecasts
Predict rate of technological progress
Predict acceptance of new product
Technological forecasts
Predict sales of existing product
Demand forecasts
Seven steps in forecasting
1 Determine the use of the forecast
2 Select the items to be forecasted
3 Determine the time horizon of the forecast
4 Select the forecasting model(s)
5 Gather the data
6 Make the forecast
7 Validate and implement results
True or False. Most forecasting methods assume that there is some underlying stability in the system
True
> Used when situation is vague & little data exist:
New products
New technology
Involves intuition, experience:
e.g., forecasting sales on Internet
Qualitative methods
> Used when situation is ‘stable’ & historical data exist
Existing products
Current technology
Involves mathematical techniques
e.g., forecasting sales of color televisions
Quantitative methods
Pool opinions of high-level executives, sometimes augment by statistical models
Jury of executive opinion
Panel of experts, queried iteratively
Delphi method
Estimates from individual salespersons are reviewed for reasonableness, then aggregated
Sales force composite