week2-forcasting.ppt

What is Forecasting? Types of Forecasts by Time Horizon Short-range forecast Up to 1 year; usually less than 3 months Job scheduling, worker assignments Medium-range forecast 3 months to 3 years Sales production planning, budgeting Long-range forecast 3+ years New product planning, facility location Short-term vs. Longer-term Forecasting Medium/long range forecasts deal with more comprehensive issues and support management decisions regarding planning and products, plants and processes. Short-term forecasting usually employs different methodologies than longer-term forecasting Short-term forecasts tend to be more accurate than longer-term forecasts. Influence of Product Life Cycle Stages of introduction and growth require longer forecasts than maturity and decline Forecasts useful in projecting staffing levels, inventory levels, and factory capacity as product passes through life cycle stages Types of Forecasts Economic forecasts Address business cycle, e.g., inflation rate, money supply etc. Technological forecasts Predict rate of technological progress Predict acceptance of new product Demand forecasts Predict sales of existing product Seven Steps in Forecasting Determine the use of the forecast Select the items to be forecasted Determine the time horizon of the forecast Select the forecasting model(s) Gather the data Make the forecast Validate and implement results Realities of Forecasting Forecasts are seldom perfect Most forecasting methods assume that there is some underlying stability in the system Both product family and aggregated product forecasts are more accurate than individual product forecasts Forecasting Approaches Overview of Qualitative Methods Jury of executive opinion Pool opinions of high-level executives, sometimes augment by statistical models Delphi method Panel of experts, queried iteratively Sales force composite Estimates from individual salespersons are reviewed for reasonableness, then aggregated Consumer Market Survey Ask t