Classes 14, 15 and 16 - Forecasting - Chap 9

Classes 14, 15 and 16 - Forecasting - Chap 9 - BUS 370:...

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BUS 370: Forecasting Chapter 9 Donavon Favre College of Management North Carolina State University
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Chapter Objectives Be able to:  Discuss the importance of forecasting and  identify the most appropriate type of forecasting  approach, given different forecasting situations.  Apply a variety of time series forecasting  models, including moving average, exponential  smoothing, and linear regression models.  Develop causal forecasting models using linear  regression and multiple regression.  Calculate measures of forecasting accuracy and  interpret the results. 
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Forecast Demand Firm-level Market-level Supply Materials Labor supply Price Cost of supplies and services Cost of money — interest rates, currency rates Market price for firm’s product or service Definition: An estimate of the future level of some variable TYPES:
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Why forecast? Assess long-term capacity needs Develop budgets, hiring plans, etc. Plan production or order materials Get agreement within  firm & across  supply  chain partners
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Forecast Characteristics Almost always  wrong More accurate for groups  or families More accurate for shorter  time periods No substitute  for calculated demand.
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Used when situation is  ‘stable’ & historical data  exist Existing products Current technology Heavy use of  mathematical techniques ex., forecasting sales of a  mature products Quantitative Methods Used when situation is  vague & little data exist New products New technology Involves intuition,  experience ex., forecasting sales to  a new market Qualitative Methods Forecasting Approaches
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Selecting a Forecasting Method Quantitative historical data available. Evidence of a relationship between the variable of interest and some other variable(s). Qualitative Techniques Market surveys “Build-up” forecasts Life cycle analogy Panel consensus Delphi method Little or no quantitative data available Relationship between past events and future events difficult or impossible to model quantitatively Which statements best describe the forecasting situation?
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Classes 14, 15 and 16 - Forecasting - Chap 9 - BUS 370:...

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