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    Forecasting: Operations Management Topic III

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    Ria Bryle
    This document provides an overview of forecasting techniques used in operations management. It defines forecasting as predictions about future values of variables of interest that enable more informed decision making. Common features of forecasts are that they assume past trends will continue and are rarely perfect, being more accurate for groups than individuals. Accuracy decreases with longer time horizons. Good forecasts are timely, accurate, reliable, cost-effective, and use simple techniques. The forecasting process involves determining purpose, time horizon, technique, data analysis, making the forecast, and monitoring. Approaches include judgment-based and time-series methods. Time-series analysis examines trends, seasonality, cycles, and irregular variations. Naive methods use previous values. Averaging

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    Forecasting: Operations Management Topic III

    Uploaded by

    Ria Bryle
    26 views18 pages
    This document provides an overview of forecasting techniques used in operations management. It defines forecasting as predictions about future values of variables of interest that enable more informed decision making. Common features of forecasts are that they assume past trends will continue and are rarely perfect, being more accurate for groups than individuals. Accuracy decreases with longer time horizons. Good forecasts are timely, accurate, reliable, cost-effective, and use simple techniques. The forecasting process involves determining purpose, time horizon, technique, data analysis, making the forecast, and monitoring. Approaches include judgment-based and time-series methods. Time-series analysis examines trends, seasonality, cycles, and irregular variations. Naive methods use previous values. Averaging

    Original Title

    OPMAN TOPIC 3

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    This document provides an overview of forecasting techniques used in operations management. It defines forecasting as predictions about future values of variables of interest that enable more informed decision making. Common features of forecasts are that they assume past trends will continue and are rarely perfect, being more accurate for groups than individuals. Accuracy decreases with longer time horizons. Good forecasts are timely, accurate, reliable, cost-effective, and use simple techniques. The forecasting process involves determining purpose, time horizon, technique, data analysis, making the forecast, and monitoring. Approaches include judgment-based and time-series methods. Time-series analysis examines trends, seasonality, cycles, and irregular variations. Naive methods use previous values. Averaging

    Copyright:

    © All Rights Reserved
    26 views18 pages

    Forecasting: Operations Management Topic III

    Uploaded by

    Ria Bryle
    This document provides an overview of forecasting techniques used in operations management. It defines forecasting as predictions about future values of variables of interest that enable more informed decision making. Common features of forecasts are that they assume past trends will continue and are rarely perfect, being more accurate for groups than individuals. Accuracy decreases with longer time horizons. Good forecasts are timely, accurate, reliable, cost-effective, and use simple techniques. The forecasting process involves determining purpose, time horizon, technique, data analysis, making the forecast, and monitoring. Approaches include judgment-based and time-series methods. Time-series analysis examines trends, seasonality, cycles, and irregular variations. Naive methods use previous values. Averaging

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    © All Rights Reserved
    of 18

    OPERATIONS MANAGEMENT

    Topic III

    FORECASTING

    Prof. Marissa Lanuza


    Meaning of Forecast

     A statement about the future  The better those predictions, the


    value of a variable of interest more informed decisions can be

     Predictions about the future  Plays an important role in the


    planning process because they
    enable managers to anticipate
    the future so they can plan
    accordingly

    2
    FEATURES
    COMMON
    TO
    ALL
    FORECAST
    “ 1. Forecasting techniques
    generally assume that the
    same underlying causal
    system that existed in the
    past will continue to exist in
    the future.

    4
    “ 2. Forecasts are rarely
    perfect, actual results
    usually differ from predicted
    values.

    5
    3. Forecasts for groups of
    “ items tend to be accurate
    than forecasts for individual
    items because forecasting
    errors among items in a
    group usually have a
    canceling effect.
    6
    “ 4. Forecasts accuracy
    decreases as the time period
    covered by the forecasts –
    the time horizon – increases.

    7
    Elements of a Good Forecasts
    1. The forecast should be timely.
    2. The forecast should be accurate.
    3. The forecast should be reliable.
    4. The forecast should be expressed in meaningful
    units.
    5. The forecast should be in writing.
    6. The forecasting technique should be simple to
    understand and use.
    7. The forecast should be cost – effective.
    8
    Steps in the Forecasting
    Process
    1) Determine the purpose of the
    forecast.
    2) Establish a time horizon.
    3) Select a forecasting technique.
    4) Obtain, clean and analyze
    appropriate data.
    5) Make the forecast.
    6) Monitor the forecast.

    9
    Approaches
    to
    Forecasting
    Approaches to Forecasting
    I. Forecasts Based on Judgment and Opinion
    - Executive Opinions
    - Salesforce Opinions
    - Consumer Surveys
    - Delphi Method
    *An iterative process in which managers and staff
    complete a series of questionnaires, each developed from the
    previous one, to achieve a consensus forecast.

    11
    Approaches to Forecasting
    II. Forecasts Based on Time-Series Data
    • Time Series – A time-ordered sequence of
    observations taken at regular intervals.
    • Analysis of time-series data requires the analyst to
    identify the underlying behavior of the series.
    • These behaviors can be described as follows:

    12
    Approaches to Forecasting
    II. Forecasts Based on Time-Series Data
    1. TREND – refers to long-term upward or downward
    movement in the data.
    Examples: Population shifts, changing incomes, and cultural
    changes
    2. SEASONALITY – refers to a short-term, fairly regular
    variations generally related to factors such as the calendar or
    time of day.
    Examples: Restaurants, Supermarkets and Theater
    experiences weekly and even daily “seasonal” variations
    13
    Approaches to Forecasting
    II. Forecasts Based on Time-Series Data
    3. CYCLES – are wavelike variations of more than one
    year’s duration and economic, political and even agricultural
    conditions.
    4. IRREGULAR VARIATIONS – are due to unusual
    circumstances such as severe weather conditions, strikes, or a
    major change in a product or service.
    5. RANDOM VARIATIONS – are residual variations that
    remain after all other behaviors have been accounted for.

    14
    Approaches to Forecasting
     NAIVE METHODS
    • A forecast for any period that equals the previous
    period’s actual value.

    15
    TECHNIQUES FOR AVERAGING

    1. MOVING 2. WEIGHTED 3. EXPONENTIAL


    AVERAGE MOVING SMOOTHING
    AVERAGE

    16
    ACTIVITY FOR TOPIC III
    Give your reflection on the following newsclip (10 points)
    High Forecasts Can Be Bad News
    Overly optimistic forecasts by retail store buyers can easily lead retailers to
    overorder, resulting in bloated inventories. When that happens, there is pressure on
    stores to cut prices in order to move the excess merchandise. Although customers
    delight in these markdowns, retailer profits generally suffer. Furthermore, retailers will
    naturally cut back on new orders while they work off their inventories, creating a
    ripple effect that hits the entire supply chain, from shippers, to producers, to suppliers
    of raw materials. The message is clear: Overly optimistic forecasts can be bad news.

    17
    THANKS!

    18

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