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Forecasting: Elements of Good Forecast

This document discusses forecasting techniques and the forecasting process. It includes: 1. The elements of an accurate, timely, and reliable forecast include being in writing, having a simple technique, determining the purpose and time horizon, selecting a technique, analyzing relevant data, preparing and monitoring the forecast. 2. There are two main approaches to forecasting - using judgement and opinion like surveys, or time series data like trends and seasonality. 3. Common forecasting techniques include moving averages, exponential smoothing, and simple linear regression which are used to analyze time series data and develop a forecast. Accuracy is measured by errors like MAD and MSE.

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413 views

Forecasting: Elements of Good Forecast

This document discusses forecasting techniques and the forecasting process. It includes: 1. The elements of an accurate, timely, and reliable forecast include being in writing, having a simple technique, determining the purpose and time horizon, selecting a technique, analyzing relevant data, preparing and monitoring the forecast. 2. There are two main approaches to forecasting - using judgement and opinion like surveys, or time series data like trends and seasonality. 3. Common forecasting techniques include moving averages, exponential smoothing, and simple linear regression which are used to analyze time series data and develop a forecast. Accuracy is measured by errors like MAD and MSE.

Uploaded by

Number But
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© © All Rights Reserved
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Download as PPT, PDF, TXT or read online on Scribd
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Forecasting

Accurate
Timely
Reliable
In writing
Technique should be simple to understand and use
Determine the purpose of the forecast
Establish a time horizon
Select a forecasting technique
Gather and analyse relevant data
Prepare the forecast
Monitor the forecast
Elements of good forecast
Steps in forecasting process
Approaches to Forecasting
1. Based on Judgement and Opinion:
Executive opinion
Sales-force opinion
Consumer surveys
Delphi method
2. Based on Time Series Data:
Trend
Seasonality
Forecasting
Forecasting
Averaging Techniques
Simple moving average
n
A
F
n
i
i
t

1
Weighted moving average

n
i
i
n
i
i i
t
w
w A
F
1
1
Forecasting
Exponential Smoothing

1 1 1

t t t t
F A F F
For smoother demand, is less, the forecasting trend will be smoother
For fluctuating demand, is more, the trend will be less smooth
Simple Linear Regression
bx a y


2
2
x x n
y x xy n
b
x b y a
Forecasting
Accuracy of Forecasts
t t t
F A e
Two commonly used measures:
n
Forecast Actual
MAD


1
2

n
Forecast Actual
MSE
Mean absolute deviation (MAD)
Mean squared error (MSE)

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