forecasting. planning forecast customer production process finished goods inputs

ForecastingForecasting

Planning Forecast

Customer

ProductionProcess

FinishedGoods

Inputs

Forecasting

Marketing: forecasts sales for new and

existing products.

Production: uses sales forecasts to plan

production and operations; sometimes

involved in generating sales forecasts.

Characteristics of Forecasts

They are usually wrong A good forecast is usually more than a single

number Aggregate forecast are more accurate The longer the forecasting horizon, the less

accurate the forecasts will be Forecasts should not be used to the exclusion

of known information

Forecasting Horizon

Short term(inventory management, production plans..)

Intermediate term(sales patterns for product families..)

Long term(long term planning of capacity needs)

Forecasting Techniques

JudgmentalModels

Time SeriesMethods Causal Methods

ForecastingTechnique

DelphiMethod

MovingAverage

ExponentialSmoothing

RegressionAnalysis

SeasonalityModels

Types of forecasting Methods

Subjective methodsFREE HAND METHOD

Objective methodsSEMI AVERAGE

EVEN DATA ODD DATA

LEAST SQUARETREND MOMENT

FREE HAND METHOD

SEMI AVERAGEEVEN DATA

Y = a + bX

No. Year

Sales (Y-axis) Base time

(X-axis)

1 1988 1850 0 ∑ 1-6 = 11520

2 1989 1800 1 Y1 1920

3 1990 1900 2 X1 2.5

4 1991 2000 3

5 1992 1950 4

6 1993 2020 5 a= 3514.81 and b= 291.72

7 1994 1980 6 ∑ 7-12 = 11979

8 1995 1960 7 Y2 1996.5

9 1996 2000 8 X2 8.5

10 1997 2200 9

11 1998 2240 10

12 1999 2220 11

SEMI AVERAGEODD DATA

No. Year

Sales (Y-axis) Base time

(X-axis)

1 1988 1850 0 ∑ 1-5 = 9500

2 1989 1800 1 Y1 1900

3 1990 1900 2 X1 2

4 1991 2000 3

5 1992 1950 4

6 1993 2020 5 a= 1868 and b= 16

7 1994 1980 6 ∑ 7-11 = 9980

8 1995 1960 7 Y2 1996

9 1996 2000 8 X2 8

10 1997 2200 9

11 1998 2240 10

Y = a + bX

TREND MOMENT METHOD

LEAST SQUARE METHOD

EVEN DATA CASE