OPS MODULE 4 Flashcards
A statement about the future value of interest
Forecast
T or F: Forecasts are not important to making informed decisions
False (important)
T or F: We make forecasts about such things as weather, demand, and resource availability
True
What are the two important aspects of forecasts?
- Expected Level of Demand
- Accuracy
The level of demand may be a function of structural variation such as trend or seasonal variation
Expected Level of Demand
It is related to the potential size of forecast error
Accuracy
What are the two uses of forecast?
- Plan the system
- Plan the use of system
It involved long-range plans related to:
- Types of products and services to offer
- Facility and equipment levels
- Facility location
Plan the system
T or F: Forecasts are perfect
False (not perfect because random variation is always present, there will always be some residual error, even if all other factors have been accounted for.)
It generally involves short and medium-ranged plans related to:
- Inventory management
- Workforce levels
- Purchasing
- Production
- Budgeting
- Scheduling
Plan the use of system
T or F: Forecasts for groups of items are not accurate compared those for individual items
False (are more accurate)
T or F: Forecast accuracy increases as the forecasting horizon increases
False (Forecast accuracy decreases ; inversely proportional relationship sila)
T or F: Techniques assume some underlying causal system that
existed in the present will persist into the future
False (existed in the past)
What are the elements of a good forecast?
TARMISC
-Timely
-Accurate
-Reliable
-expressed in Meaningful units
-In writing or report
-Simple to understand and use
-Cost-effective
What are the steps in forecasting process?
DEOSMM
1. Determine the purpose of the forecast
2. Establish a time horizon
3. Obtain, clean, and analyze appropriate data
4. Select a forecasting technique
5. Make the forecast
6. Monitor the forecast errors
T or F: It is important to provide an indication of the extent to which the forecast might deviate from the value of the variable that actually occurs
True
T or F: Allowances should not be made for forecast errors
False (should be made)
T or F: Forecast errors should be monitored
True
What is the formula for error?
Error= Actual - Forecast
In forecast accuracy and control, corrective action may be necessary if ___________.
If error fall beyond acceptable bounds
In forecast accuracy metrics, ____________ weights all errors evenly
Mean Absolute Deviation (MAD)
In forecast accuracy metrics, ____________ weights errors according to their squares values
Mean Squared Error (MSE)
In forecast accuracy metrics, ____________ weights errors according to relative error
Mean Absolute Percentage Error (MAPE)
What are the two forecasting approaches?
Qualitative and Quantitative Forecasting
T or F: Quantitative techniques permit the inclusion of soft information such as:
- Human factors
- Personal opinions
- Hunches
False (Qualitative)
T or F: Soft information such as human factors, opinions, hunches, are easy, or possible, to quantify
False (difficult, or impossible)
__________ forecasting approach rely on hard data
Quantitative
T or F: Quantitative techniques involves either the projection of present data or the development of associative methods that attempt to use causal variables to make a forecast.
False (historical data not present data)
_____________ forecasts that use subjective inputs such as opinions from consumer surveys, sales staff, managers, executives, and experts.
Qualitative
Qualitative forecasts includes the subjective inputs like:
ESCO
- Executive pinions
- Sales force opinions
- Consumer surveys
- Other approaches
A small group of upper-level managers may meet and collectively develop a
forecast
Executive Opinons
Members of the sales or customer service staff can be good sources of
information due to their direct contact with customers and may be aware of
plans customers may be considering for the future
Sales force opinions
Since consumers ultimately determine demand, it makes sense to solicit input from them. It typically represent a sample of consumer opinions
Consumer surveys
Managers may solicit opinions from other managers or staff people or outside experts to help with developing a forecast.
Other approaches
_________ method is an iterative process intended to achieve a consensus
Delphi
_______ forecasts that project patterns identifies in recent time-series observations
Time-series
It is a time-ordered sequence of observations taken at regular time intervals
Time-series
T or F: Assume that future values of the time-series cannot be estimated from past values of time-series
False (can be estimated)
What are the time-series behaviors?
TSCIR
- Trend
- Seasonality
- Irregular variations
- Random variations
It is a long-term upward or downward movement in data
- Population shifts
- Changing income
Trend
______ is a short-term, fairly regular variations related to the calendar or time of day
-Restaurants, service call centers, and theaters all experience ______ demand.
Seasonality ; Seasonal
T or F: Seasonality is a long-term, fairly regular variations related to the calendar of time of day
False (short-term not long-term)
_____ is a wavelike variations lasting more than one year
- These are often related to a variety of economic, political, or even agricultural conditions
Cycle
_________ is due to unusual circumstances that do not reflect typical behavior
- Labor strike
- Weather event
Irregular variation
__________ is a residual variation that remains after all other behaviors have been accounted for
Random variation
________ uses a single previous value of a time series as the basis for a forecast
Naïve forecast
_________ can be used with:
-Stable time series
-Seasonal variations
-Trend
Naïve forecast
What the techniques that work best when a series tends to vary about an average?
MWE
- Moving average
- Weighted moving average
- Exponential smoothing
T or F: Averaging techniques smooth variations in the data
True
T or F: Averaging techniques can handle step changes or drastic changes in the level of a series
False (gradual changes not drastic)
________ technique that averages a number of the most recent actual values in generating a forecast
Moving average
T or F: In moving average, as ______ become available, the forecast is updated by adding the _______ and dropping the _______ and then re-computing the average
New data; newest value ; oldest
T or F: Moving average technique averages a number of the past actual values in generating a forecast
False (most recent actual values not past actual values
In moving average, the number of data points included in the average determines the model’s sensitivity
___________ ; more responsive
___________ ; less responsive
Fewer data points used; more responsive
More data points used ; less responsive
In __________, the most recent values in a time series are given more weight in computing a forecast
Weighted moving average
T or F: In weighted moving average, the choice of weights, w, is somewhat arbitrary and involves some trial and error
True
It is a weighted averaging method that is based on the previous forecast plus a percentage of the forecast error
Exponential Smoothing
___________ is a simple data plot that can reveal the existence and nature of a trend
Linear Trend
What is the linear trend equation?
Ft = a + bt
______ and _______ can be estimated from historical data
Slope and intercept
____________ consists of two components:
- Smoothed error
- Trend factor
Trend-adjusted exponential smoothing
What are the two components that the trend-adjusted exponential smoothing consists?
-Smoothed error
-Trend factor
T or F: In trend-adjusted exponential smoothing, alpha and beta are smoothing constants
True
T or F: Trend-adjusted exponential smoothing has the ability to respond to changes in trend
True
________ is a regularly repeating movements in series values that can be tied to recurring events
Seasonality
T or F: Seasonality is a regularly repeating movements in series values that can be ties to occurring events
False (recurring not occurring)
T or F: Seasonality is expressed in terms of the amount that actual values do not deviate from the average values of a series
False (deviate instead of do not deviate)
What are the two models of seasonality?
-Additive
-Multiplicative
Additive seasonality is expressed as a quantity that gets _______ to or _______ from the time-series average in order to incorporate seasonality.
added ; subtracted
Multiplicative seasonality is expressed as a __________ of the average (or trend) amount which is then used to multiply the value of a series in order to incorporate seasonality
percentage
___________ is the seasonal percentage used in the multiplicative seasonally adjusted forecasting model
Seasonal relatives
Using seasonal relatives:
To __________ data
-Done in order to get a clearer picture of the nonseasonal (e.g.,
trend) components of the data series
-Divide each data point by its seasonal relative
deseasonalize data
Using seasonal relatives:
To __________ in a forecast
-Obtain trend estimates for desired periods using a trend
equation
-Add seasonality by multiplying these trend estimates by the
corresponding seasonal relative
incorporate seasonality
T or F: Tracking forecast errors and analyzing them can provide useful insight into whether forecasts are performing unsatisfactorily
False (satisfactorily not unsatisfactorily)
___________ are useful for identifying the presence of non-random error in the forecasts
Control Charts
Tracking signals can be used to detect ___________
forecast bias
All are sources of forecasts errors except:
A. Model may be inadequate
C. Irregular variations may have occurred
D. Random variation
E. None of the above
E. None of the above
The model may be inadequate due to:
- ________ of an important variable
- a ________ or ______ in the variable the model cannot handle
- the _______ of a new variable
omission ; change or shift ; appearance
What are the factors to consider when choosing a forecasting technique?
CAAATF
- Cost
- Accuracy
- Availability of historical data
- Availability of forecasting software
- Time needed to gather and analyze data and prepare a forecast
- Forecast horizon
T or F: The better forecasts are, the more organizations will
be able to take advantage of future opportunities and reduce
potential risks
True
T or F: In operations strategy, we should increase the time horizon forecasts have to cover
False (reduce not increase)
T or F: Sharing forecasts or demand data through the supply chain can
improve forecast quality
True
T or F: A worthwhile strategy is to work to improve long-term forecasts
False (short-term instead of long-term)
T or F: Accurate up-to-date information can have a significant effect on forecast accuracy:
- Prices
- Demand
- Other important variables
True
