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Forecasting Ppt01

Forecasting involves making predictions about future values or events. It plays an important role in planning by allowing managers to anticipate the future and plan accordingly. There are two main types of forecasting techniques - qualitative techniques which use subjective inputs, and quantitative techniques which involve projecting historical data or using causal models. Common quantitative techniques include time series analysis, regression analysis, and exponential smoothing. Forecasts must be accurate, reliable, timely, and cost effective to be useful for operations planning and decision making.

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246 views119 pages

Forecasting Ppt01

Forecasting involves making predictions about future values or events. It plays an important role in planning by allowing managers to anticipate the future and plan accordingly. There are two main types of forecasting techniques - qualitative techniques which use subjective inputs, and quantitative techniques which involve projecting historical data or using causal models. Common quantitative techniques include time series analysis, regression analysis, and exponential smoothing. Forecasts must be accurate, reliable, timely, and cost effective to be useful for operations planning and decision making.

Uploaded by

LeojelaineIgcoy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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FORECASTING

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“A statement about the future value
of a variable of interest
such as demand.”

FORECASTING
F
O
R The basis for budgeting, planning capacity, sales,
production and inventory, personnel, purchasing
E and more.
C It plays an important role in the planning process
A because they enable managers to anticipate the
future so they can plan accordingly.
S
T It is also an important component of yield manage
ment.
I
N
G
FORECASTING
affect decisions and activities throughout an organization

ACCOUNTING MARKETING
New product/process cost estimates, Pricing and promotion, e-business strategies,
01 profit projections, cash management. 04 global competition strategies

FINANCE OPERATIONS
Equipment/equipment replacement needs, Schedules, capacity planning, work
02 timing and amount of funding/borrowing 05 assignments and workloads
needs.

HUMAN RESOURCES PRODUCT/SERVICE DESIGN


Hiring activities, including recruitment, Revision of current features, design of
03 interviewing, training, layoff planning, 06 new products
including outplacement, counseling
PLAN THE SYSTEM
First use is to help the managers plan the system.
It generally involves long-range plans about the 01 TWO USES OF
types of products and services to offer, what facilities and
equipment to have, where to locate and FORE
so on.

PLAN THE USE OF SYSTEM


CASTING
The other one is to plan the use of system. It refers t
o short-range and intermediate-range planning. It involv
es tasks such as planning inventory and workforce levels, 02
planning purchasing and production, budgeting and sc
heduling.
FEATURES OF FORECASTING
A wide variety of forecasting techniques that are common
to all
FEATURES OF FORECASTING
Forecasting techniques generally assume that the same
01 underlying causal system that existed in the past will continue to
exist in the future.

Forecasts are not perfect; actual results usually differ from


predicted values; the presence of randomness precludes a perfect
02 forecast. Allowances should be made for forecast errors.

Forecasts for groups of items tend to be more accurate than


forecasts for individual items due to errors among items in a group
usually have a canceling effect. Opportunities for grouping may
03 arise if parts or raw materials are used for multiple products or if a
product or service is demanded by a number of independent
sources.

Forecast accuracy decreases as the time period covered by the


forecast—the time horizon —increases. Generally speaking,
04 short-range forecasts must contend with fewer uncertainties
than longer-range forecasts, so they tend to be more accurate.
ELEMENTS OF FORECAST
1. TIMELY
2. ACCURATE

3. RELIABLE 4. MEANINGFUL UNITS

6. SIMPLE TO UNDERSTAND AND USE

5. WRITING

7. COST EFFECTIVE
STEPS IN

FORECASTING
QUALITATIVE
Qualitative methods consist mainly of subjective inputs
01
, which often defy precise numerical description.
TWO METHODS
OF
QUANTITATIVE FORECAS
Quantitative methods involve either the projection of hist
orical data or the development of associative models that 02 TING
attempt to utilize causal (explanatory) variables to make
a forecast.
TWO TECHNIQUES OF FORECASTING

QUANTITATIVE TECHNIQUES

QUALITATIVE TECHNIQUES
ASSOCIATIVE
JUDGMENTAL TIME-SERIES
MODELS
VARIETY OF
FORECASTING
TECHNIQUES
FORECAST BASED ON JUDGEMENT
SALESFORCE OPINIONS

EXECUTIVE OPINIONS

A B

D OTHER APPROACHES
C
CONSUMER SURVEYS
NAÏVE METHODS
“A forecast for any period that equals
the previous period’s actual
value.”

NAÏVE FORECAST
NAÏVE FORECAST
TECHNIQUES FOR
AVERAGING
Historical data typically contain a certain amount of
random variation, or white noise, that tends to
obscure systematic movements in the data.

The techniques smooth fluctuations in a time series


because the individual highs and lows in the data
offset each other when they are combined into an average.

The techniques generate forecasts that reflect recent values of


a time series.
MOVING AVERAGE 01

THREE

WEIGHTED MOVING AVERAGE 02 TECH


NIQUES
EXPONENTIAL SMOOTHING 03
MOVING AVERAGE

One weakness of the naive method is that the forecast just traces the
actual data, with a lag of one period; it does not smooth at all. But by
expanding the amount of historical data a forecast is based on, this
difficulty can be overcome

It uses a number of the most recent actual data values in generating a forecast.
MOVING AVERAGE
MOVING AVERAGE
MOVING AVERAGE
MOVING AVERAGE
“More recent values in a series
are given more weight in
computing a forecast.”

WEIGHTED MOVING AVERAGE


EXAMPLE
SOLUTION
“A weighted averaging method
based on previous forecast plus a
percentage of the forecast error.”

EXPONENTIAL SMOOTHING
EXPONENTIAL SMOOTHING
EXPONENTIAL SMOOTHING
TECHNIQUES FOR TREND
SOLUTION
SOLUTION
TREND-ADJUSTED EXPONENTIAL SMOOTHING
TECHNIQUES FOR SEASONALITY

•
TECHNIQUES FOR SEASONALITY
USING SEASONAL RELATIVES

•
•
DESEASONALIZE DATA AND INCORPORATING SEASONALITY
EXAMPLE
EXAMPLE
COMPUTING SEASONAL RELATIVES
COMPUTING SEASONAL RELATIVES
COMPUTING SEASONAL RELATIVES
COMPUTING SEASONAL RELATIVES
USING THE SIMPLE AVERAGE METHOD
COMPUTING SEASONAL RELATIVES
USING THE SIMPLE AVERAGE METHOD

•
COMPUTING SEASONAL RELATIVES
USING THE SIMPLE AVERAGE METHOD
TECHNIQUES FOR CYCLES

•
TECHNIQUES FOR CYCLES

•
TECHNIQUES FOR CYCLES
“Associative techniques rely on identification
of related variables that can be used to predict val
ues
of the variable of interest.

ASSOCIATIVE FORECASTING TECHNIQUE


ASSOCIATIVE FORECASTING TECHNIQUE
The essence of associative techniques is
the development of an equation that
summarizes the effects of predictor variables .
The primary method of analysis is known as regression

ASSOCIATIVE FORECASTING TECHNIQUE


The simplest and most widely used form of regression
involves a linear relationship between two variables.

SIMPLE LINEAR REGRESSION


The object in linear regression is to obtain an equation of a
straight line that minimizes the sum of squared vertical
deviations of data points from the line (i.e., the least squar
es
criterion ).

SIMPLE LINEAR REGRESSION


SIMPLE LINEAR REGRESSION
SIMPLE LINEAR REGRESSION
SIMPLE LINEAR REGRESSION
•

•
SOLUTION
SOLUTION
SOLUTION
SIMPLE LINEAR REGRESSION
SIMPLE LINEAR REGRESSION
SIMPLE LINEAR REGRESSION
•

•
•
•
•
•
•
SIMPLE LINEAR REGRESSION
SIMPLE LINEAR REGRESSION

•
SIMPLE LINEAR REGRESSION
SIMPLE LINEAR REGRESSION
SIMPLE LINEAR REGRESSION
SIMPLE LINEAR REGRESSION
SOLUTION
SIMPLE LINEAR REGRESSION

•
ACCURACY AND CONTROL OF FORECASTS
ACCURACY AND CONTROL OF FORECASTS
ACCURACY AND CONTROL OF FORECASTS

𝑒1 𝐴1 𝐹1
ACCURACY AND CONTROL OF FORECASTS
SUMMARIZING FORECAST ACCURACY
SUMMARIZING FORECAST ACCURACY
SUMMARIZING FORECAST ACCURACY
SUMMARIZING FORECAST ACCURACY
MONITORING FORECAST ERROR
MONITORING FORECAST ERROR
MONITORING FORECAST ERROR
•
MONITORING FORECAST ERROR



MONITORING FORECAST ERROR
MONITORING FORECAST ERROR
MONITORING FORECAST ERROR
SOLUTION
MONITORING FORECAST ERROR
SOLUTION
SOLUTION
SOLUTION
MONITORING FORECAST ERROR

MONITORING FORECAST ERROR

CHOOSING FORECAST TECHNIQUE

CHOOSING FORECAST TECHNIQUE

CHOOSING FORECAST TECHNIQUE
CHOOSING FORECAST TECHNIQUE
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USING FORECAST INFORMATION
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USING FORECAST INFORMATION
•
COMPUTER SOFTWARE IN FORECASTING

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OPERATIONS STRATEGY
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OPERATIONS STRATEGY
•
OPERATIONS STRATEGY
•
OPERATIONS STRATEGY
•
OPERATIONS STRATEGY
•
OPERATIONS STRATEGY
•

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