FORECASTING

Question 1

A statement about the future value of a variable of interest such as demand.

Answer 1

Forecast

Question 2

is the art and science of predicting what will happen in the future.

Answer 2

Forecasting

Question 3

While it can be up to one year, this forecast is usually used for three months or less. It is used for planning purchases, hiring, job assignments, production
levels, and the like.

Answer 3

Short range
forecast

Question 4

This is generally three months to three years. used for sales and production planning, budgeting, and analysis of different
operating plans.

Answer 4

Medium range forecast

Question 5

Generally three years or more in time span, it is used for new products, capital expenditures, facility expansion, relocation, and research and
development.

Answer 5

Long range
forecast

Question 6

are more comprehensive in nature. They support and guide management decisions in planning products, processes, and plants. A new plant can take seven or eight years from the time it is thought of, until it is ready to move
into and become functional.

Answer 6

Medium and long
range forecasts

Question 7

use different methodologies than the others. quantitative in nature and use existing data in mathematical formulas to
anticipate immediate future needs and impacts.

Answer 7

Short term
forecasts

Question 8

are more accurate than medium or long range forecasts. A lot can change in three months, a year, three years, and longer. Factors that could influence those forecasts change every day. need to be updated
regularly to maintain their effectiveness.

Answer 8

Short term
forecasts

Question 8

• address the business
  cycle.
• They predict housing
  starts, inflation rates,
  money supplies, and
  other indicators.

Answer 8

1. Economic
   forecasts

Question 8

• monitor rates of technological
  progress.
• This keeps organizations abreast
  of trends and can result in
  exciting new products.
• New products may require new
  facilities and equipment, which
  must be planned for in the
  appropriate time frame.

Answer 8

2. Technological
   forecasts

Question 8

• deal with the company’ s products and estimate consumer demand.
• These are also referred to as sales forecasts, which have multiple purposes.
• In addition to driving scheduling, production, and capacity, they are also
  inputs to financial, personnel, and marketing future plans.

Answer 8

3. Demand forecasts

Question 9

These seven steps can
generate forecasts.

Answer 9

1. Determine what the forecast is for.
2. Select the items for the forecast.
3. Select the time horizon.
4. Select the forecast model type.
5. Gather data to be input into the
   model.
6. Make the forecast.
7. Verify and implement the results.

Question 10

This is based on the inputs and decisions of high-level
experts or management.

Answer 10

Qualitative methods include:
1. Jury of executive opinion.

Question 11

Decision makers, staff, and respondents all meet to
develop the forecast. Every shareholder in the process
provides input.

Answer 11

Qualitative methods include:
2. Delphi method.

Question 12

Each sales person provides an individual estimate
which is reviewed for realism by management, and
then combined for a big picture view.

Answer 12

Qualitative methods include:
3. Sales force composite.

Question 13

This is surveying the prospective customer base to
determine demand for existing products and can also
be used for new products.

Answer 13

Qualitative methods include:
4. Consumer market survey.

Question 13

predict by assuming the future is a function of the past.

Answer 13

Quantitative methods include:
1.Time-series models

Question 14

uses similar historical data inputs and then includes other external variables
such as advertising budget, housing, competitor’s prices and more.

Answer 14

Quantitative methods include:
2. Associative models

Question 15

is one in which the forecast for a
given period is simply equal
to the value observed in the
previous period.

Answer 15

Time Series Models:
1.Naïve method

Question 15

Moving averages are usually calculated to identify the direction of a trend. This can be done in a variety of ways, with the most common being simple and weighted moving averages.

Answer 15

Time Series Models:
2. Moving averages
(Simple Moving Average)

Question 16

Weighted moving average is the same as the simple moving average with the addition of a
weight for each one of the last “n” periods. In practice, these weights need to be determined in a way to produce the most

Answer 16

Time Series Models:
2. Moving averages
(Weighted Moving Average)

Question 16

This method uses a combination of the last
actual demand and the last forecast to produce the forecast for the next period. The purpose is to provide a smoothed representation of the underlying trend, seasonality, and random components in a time series.

Answer 16

Time Series Models:
3. Exponential smoothing

Question 17

It involves identifying and extrapolating patterns or trends from past observations to
make informed predictions about future values. It works on the assumption that the behavior pattern of factors that are behind past trends will be the same in the future as well.

Answer 17

Time Series Models:
4. Trend projection

Question 18

The simplest and most widely used form of regression involves a linear relationship
between two variables. The goal is to find a linear equation that best fits the data and can
be used to predict the value of the dependent variable based on the value of the independent variable.

Answer 18

Associative Model:
1. Simple linear regression

Question 19

It provides a sense of
how much, on average,
the predictions deviate
from the actual outcomes.

Answer 19

Mean Absolute Deviation

Question 20

It provides a measure
of how spread out the errors are and how much, on average, the predictions deviate from the actual outcomes.

Answer 20

Mean Squared Error

Question 20

Tools for forecasting in this regard include point of sale tracking that computes sales by
the quarter hour to establish a pattern for scheduling of personnel for peak times and
deliveries or other activities during slower periods.

Answer 20

Service Sector

Question 20

It provides a percentage-
based measure of how accurate your predictions are in relation
to the actual outcomes.

Answer 20

Mean Absolute Percentage Error

Question 21

Local events can increase the need for hotel stays, food, gas, and more. Holidays will have
an impact. It can be narrowed to hours in the day around popular meal times.

Answer 21

Service Sector

Question 22

focuses on jobs. Jobs are assigned to individuals for a period of time, or jobs are assigned to workstations for completion. A job is the objective being produced, either a good or a service. Scheduling to meet demand is a critical aspect of the operations manager’s function in the organization.

Answer 22

Operations Scheduling

Question 23

is the process of organizing, choosing, and timing resource usage to carry out all the
activities necessary to produce the desired outputs at the desired times, while satisfying a large number of time and relationship constraints
among the activities and the resources.”

Answer 23

Scheduling

Question 23

is a performance measure
that tracks the time a job is in the system.

Answer 23

Flow time

Question 24

is a measure of by how much time a job missed its due date.

Answer 24

Past due

Question 25

is the total when one adds the scheduled receipts for items, plus the on- hand inventories for those items, and reduces inventory holding costs.

Answer 25

Performance Measures

2. Total inventory

Formula:
(Scheduled Receipts + On-hand Inventory) - Inventory Holding Costs
Total Inventory = (200 units + 100 units) - $200
= 300 units - $200
= 100 units

Question 25

is the total amount of time required to complete a group of
jobs. It is calculated by subtracting the starting time of a job from the time of completion from the last job. This technique results in lower inventory and increased delivery speed.

Answer 25

Performance Measures

1. Makespan

Makespan = 2 weeks + 3weeks + 2 weeks + 4 weeks

= 11 weeks

Question 26

is measured as a ratio of average output rate to maximum capacity. Maximizing utilization creates slack capacity.

Answer 26

Performance Measures

3. Utilization

Average Output Rate/Maximum Capacity x 100