ch04 Demand Forecasting in a Supply Chain.pptVIP

8/29/00 S. Chopra / Demand Planning Chapter 4Demand Forecastingin a Supply Chain Outline The role of forecasting in a supply chain Characteristics of forecasts Components of forecasts and forecasting methods Basic approach to demand forecasting Time series forecasting methods Measures of forecast error Forecasting demand at Tahoe Salt Forecasting in practice Role of Forecasting in a Supply Chain The basis for all strategic and planning decisions in a supply chain Used for both push and pull processes Examples: Production: scheduling, inventory, aggregate planning Marketing: sales force allocation, promotions, new production introduction Finance: plant/equipment investment, budgetary planning Personnel: workforce planning, hiring, layoffs All of these decisions are interrelated Characteristics of Forecasts Forecasts are always wrong. Should include expected value and measure of error. Long-term forecasts are less accurate than short-term forecasts forecast horizon is important Aggregate forecasts are more accurate than disaggregate forecasts Forecasting Methods Qualitative: primarily subjective; rely on judgment and opinion Time Series: use historical demand only Static Adaptive Causal: use the relationship between demand and some other factor to develop forecast Simulation Imitate consumer choices that give rise to demand Can combine time series and causal methods Components of an Observation Observed demand O Systematic component S + Random component R Time Series Forecasting Time Series Forecasting Forecasting Methods Static Adaptive Moving average Simple exponential smoothing Holt’s model with trend Winter’s model with trend and seasonality Basic Approach toDemand Forecasting Understand the objectives of forecasting Integrate demand planning and forecasting Identify major factors that influence the demand forecast Understand and identify customer segments Determine the appropriate forecasting technique Establish performance and error measures