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L2 Forecasting

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14 views25 pages

L2 Forecasting

Uploaded by

nahla13ibrahim
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Nile valley University

Faculty of Graduate studies


M.Eng.: Engineering system Management
Nof. 2024
Berbar group
Production Management

Lec. 2: Forecasting Fundamentals


Outline
1. Fundamental Principles of Forecasting
2. Major Categories of Forecasts
3. Forecast Errors
4. Computer Assistance
FUNDAMENTAL PRINCIPLES Of FORECASTING
• Forecasting is a technique for using past experiences to
project expectations for the future.
1. Forecasts are almost always wrong.
2. Forecasts are more accurate for groups or families of
items.
3. Forecasts are more accurate for shorter time periods.
4. Every forecast should include an estimate of error.
5. Forecasts are no substitute for calculated demand
MAJOR CATEGORIES Of FORECASTS 2.2
• Qualitative and.
• Quantitative
MAJOR CATEGORIES Of FORECASTS 2.2

• Qualitative forecasting are generated from information


that does not have a well-defined analytic structure.
• key characteristics:
– based on personal judgment
– Subjective
– Rapid results.
– used for individual products
Qualitative forecasting methods
• Market surveys: questionnaires submitted to
potential customers in the market.
• Delphi or panel consensus: panel of experts.
• Life cycle analogy: similar product.
• Informed judgment: opinion of sales
represntives
Quantitative Forecasting-Causal
• key characteristics:
– based on relationship between variables, or one
measurable variable "causes" the other to change.
the causal variable can be measured.
– often bring excellent forecasting results.
– Learning from model development.
– seldom used for product, but commonly used for
entire markets.
– time-consuming and very expensive.
Quantitative Forecasting-Causal Methods
• Input-output models large and complex models, examine the
flow of products throughout the entire economy. require a
substantial quantity of data, making them expensive and time-
consuming to develop.
• Econometric models. involve a statistical analysis of various
sectors of the economy.
• Simulation models. Expensive and time-consuming.
• Regression.
Causal methods also called extrinsic forecasts
Quantitative forecasting-Time Series Methods

• Based on assumption is that past demand follows some


pattern, and that pattern can be analyzed and used to
develop projections for future demand.
• called intrinsic forecasts.
• Capture random pattern.
• Trend pattern.
• seasonal pattern
Quantitative forecasting-Time Series Methods
Quantitative forecasting-Time Series Methods
Quantitative forecasting-Time Series Methods
Quantitative forecasting-Time Series Methods

• Simple moving averages are nothing more than the


• mathematical average of the last several periods of actual
demand. :

• Where: F is the forecast


• t is the current time period, meaning Ft is the forecast for
the current time period
• At is the actual demand in period t, and
• n is the number of periods being used.
Points to consider:
•Forecast line is smoother
•Forecasts lag behind the actual.
Quantitative forecasting-Time Series Methods
• Weighted moving averages:
• SMA gives all n data equal weight = 1/n
Quantitative forecasting-Time Series Methods
• Simple exponential smoothing

• Were α is smoothing factor constant.


• All historic data included
• Recent data has greater weight
• larger the alpha value, the more of the
forecast error is added. It makes forecast more
responsive to actual changes in demand,
Quantitative forecasting-Time Series Methods

For initial value assume


Quantitative forecasting-Time Series Methods
Quantitative forecasting-Time Series Methods

• Regression:

• Where : is slope off line


– the x-intercept
– for data a = 18.8
– = 268.3
– The result next slide
Quantitative forecasting-Time Series Methods

• Seasonal index multiplier found by the ratio of actual to


forecasted demand
FORECAST ERRORS
• Mean forecast error:
( bias.)

Mean Absolute Deviation (MAD).

Tracking Signal.

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