ch5forecasting00 - Ch.5 Forecasting Dr Stading Mgt 3332...

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Ch.5 Forecasting Dr. Stading Mgt 3332
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Topical Areas Definition Factors Demand Management
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Forecasting Defined Estimate of future conditions for business planning purposes
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Factors Influencing Forecasts General business and economic conditions Competitive factors Market trends Company’s own plans: advertising, promotion, pricing, product changes
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Principles of Forecasting 1. Forecasts are usually wrong! 2. Every forecast should include an estimate of error! 3. Forecasts are more accurate for families or groups of products! 4. Forecasts are more accurate in the shorter or nearer time frame!
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Dependency Independent demand – demand not related to other factors, products, or services Dependent demand – demand is derived from another product, service, or factor
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Decomposition of Forecast Cycle – Spanning several years or decades Trend – Over one year Seasonality – Demand patterns repeated each year Random Variation – Many small factors affecting
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