Forecasting in Operations Management Flashcards
What is forecasting used for?
- Designing and Planning
- Capacity planning
- Production scheduling
- Staffing allocation
Strategic forecasts
- Long range
- High uncertainty
- Little quantitative data available
- Use experts
EG - Site location
- Market position
- New product launch
Tactical forecasts
- Medium range
- Some uncertainty
- Combination of methods
EG - Demand planning
- Budgeting
Operational forecasts
- Short term
- Lots of data available
- Use quantitative methods
EG - Staff scheduling
- Inventory scheduling
- Production
Dependent demand
- Variables which depends on other variables
- EG the number of parts required for the manufacturing of a car will depend on the number of cars
Independent demand
- Variables that we must predict so as to set capacity level
- EG number of car sales
Qualitative forecasting
- Jury of executive opinion
Smaller group of upper level managers meet to develop a forecast
+ brings together considerable knowledge and talents
- One person’s view may prevail
Qualitative forecasting
- Delphi
Created for long range forecasting
Experts individually develop a forecast
maintain identity
Qualitative forecasting
- Sales force composite
Use sales staff opinion to help generate forecasts
Sales staff often aware of consumer patterns and behaviour
+ Direct contact with customers
- Hard to distinguish between what customers will say and what they will do
Qualitative forecasting
- Consumer survey
Firms acquire information on consumers through surveys
Often use specialist firms
+ tactic information that is not available elsewhere
- high cost, low response rate
Quantitative techniques
Demand forecasting
- uses historical data and mathematical models
- Extrapolation (time series) methods - Moving averages
- Casual methods - simple regression, multiple regression
How forecasting can be improved by information sharing
Collaborative Planning, Forecasting, and Replenishment
“Collaboration process whereby supply chain trading partners can jointly plan key supply chain activities from production and delivery of raw materials to production and delivery of final products to end customers”
Objective of CPFR - optimise supply chain through improved demand forecasts, with the right product delivered at right time to the right location, with reduced inventories, avoidance of stock-outs, and improved customer service
Value of CPFR - broad and open exchange of forecasting information to improve forecasting accuracy. The buyer and seller collaborate through joint knowledge of base sales, promotions, store openings or closings, & new product introductions.
Radio frequency Identification
Bar-coding: Invented in the 1950s, barcodes accelerate the flow of information along the supply chain
RFID technology: embodied in small tags that emit a unique identification code enabling the tracking of the identity and location, often in ‘real time, transmitting back to a centralised database’.
