Forecasting

Question 1

What is the main consideration of forecasting?

Answer 1

Expressing demand forecasts in ways that do not reflect the consequences of past capacity decisions

Question 2

What are the three things that should be present in demand forecasts?

Answer 2

1. The forecast is expressed in terms that are useful for capacity management.
2. Forecasts should be as accurate as possible.
3. Forecasts should give an indication of relative uncertainty.

Question 3

What are the advantages and disadvantages of forecasting by the moving average method?

Answer 3

The moving average method is simple and easily understood by people without any formal training in statistics. The basic method can be adjusted to forecast seasonal and secular trends.

The main disadvantages are;

• It is best suited for short term forecasting only.
• It relies on there being sufficient historical data to calculate a meaningful moving average.
• It places equal weight on all historical figures, which may not take into account unusual events affecting some past observations.
• It is essentially a static method of forecasting that assumes past events are a guide to future events.

Question 4

What are the main differences between the single exponential smoothing and winters’ methods?

Answer 4

Single exponential smoothing, because it has only one smoothing facto, can be used only for forecasting level trends. Winter’s method may be used where secular trends or seasonal patterns exist.

Question 5

What is forecasting?

Answer 5

Estimating the future demand for products and services and the resources necessary to produce these outputs.

Question 6

Why is forecasting necessary?

Answer 6

The following are some reasons that make forecasting necessary:

1. Because demand for products and services varies from month to month, productive rates must be scaled up or down to meet the variations.
2. Production systems need some reaction time to change production rates.
3. Related activities can be better co-ordinated when adequate lead times are provided.d
4. When forecasts allow operations managers to look ahead and anticipate needed changes in the productive system, orderly change in the system can be planned.
5. Forecasts of sales demand are the beginning and driving force of the nancial budgetary control process

Question 7

What is the Delphi method?

Answer 7

There is a questionnaire sent out, this is filled in. The responses are published and reviewed by participant. They then offer a further view and this process is continued until a consensus is reached.

Question 8

What are five qualitative methods of forecasting?

Answer 8

1) Salesforce Opinions
2) Customer Surveys
3) Panel Groups
4) Delphi Method
5) Scenario planning

Question 9

What are three quantitative accuracy measures?

Answer 9

1. Total absolute deviation (TAD): This is the total sum of all the errors, ignoring the plus or minus sign.
2. Mean absolute deviation (MAD): This is calculated by dividing TAD by the number of periods forecasted.
3. Deviation spread (DS): This is the sum of the highest minus error and the highest plus error rate.

Question 10

What is the difference between exponential smoothing and Winters’ method?

Answer 10

This technique extends the principle of exponential smoothing to permit patterns with an increasing (or decreasing) straight-line trend and a seasonal cycle.