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Unformatted text preview: 1 Forecasting with Trend and Seasonality BUAD311 Session 16 Yehuda Bassok 2 Previously. . The importance of forecasting Forecast Forecast is not a single number Error measure MAD Moving average Exponential smoothing Tradeoff: stability and responsiveness 3 Objectives Aggregatelevel Forecast Riskpooling effect again! Trend forecast Seasonal forecast 4 Forecasts and Probability Distributions: How many to stock? A firm produces Red and Blue TShirts Month/demand Red Shirts Blue Shirts January 909.9 1185.0 February 616.7 546.2 March 1073.3 1229.5 April 1382.9 1248.7 May 1359.5 1337.9 June 1519.9 1539.6 July 344.9 1300.8 5 Forecast for the Red Lets open the spreadsheet. Develop forecasts using Exponential Smoothing with = 0.3 6 Forecasts and Probability Distributions Suppose the company stocks 954 Red Tshirts, the forecasted number. What is the probability the company will have a stockout, that is, that there will not be enough Tshirts to satisfy demand? The company does not want to have unsatisfied customers. So the company overstocks. Suppose the company stocks 1,026 units. What is the probability that the actual demand will be larger than 1,026? 7 There is a Distribution Around the Forecasted Sale Standard Deviation of Error = 1.25*MAD Error is assumed to be NORMALLY DISTRIBUTED with A MEAN (AVERAGE) = 0 STANDARD DEVIATION = 1.25* MAD 8 How many to stock ) ( 96 . 1 MAD 1.25 954level stock Then 025 . MAD 1.25 954level stock N(0,1) P level) stock MAD) N(954,1.25 ( level) stock demand November ( table the from P P = = = = Suppose the company desires that the probability of not being able to meet demand is 2.5% 9 How many to stock 1892 954 MAD 1.25 1.96 level stock 96 . 1 MAD 1.25 54 9 level stock = + = = Note that MAD=383 in this example. 10 Forecast for the Blue Similarly, we can develop forecasts for the Blue. 11 Blue Product Inventory Level The stocking level, of the blue product,...
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This note was uploaded on 02/25/2009 for the course BUAD 311 taught by Professor Vaitsos during the Fall '07 term at USC.
 Fall '07
 Vaitsos
 Management

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