Ops Chap 3.docx - Forecasting Basis of corporate planning...

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Forecasting Basis of corporate planning and control Strategic Forecasts : Medium and long term forecasts that are used for decisions related to strategy and estimating aggregate demand Tactical Forecasts: Short term forecasts used as input for making day to day decisions related to meeting demand Quantitative Forecasting Models Forecasting can be classified into for basic types: Qualitative time series analysis, casual relationships and simulation Casual forecasting will be using the linear regression technique, assumes that all demand is relating with some under lying factor or factors in the environment Qualitative and Time series techniques are most often used in supply chain planning and control Components of Demand Demand for products or services ca be broken down into 6 components 1. Average demand for the period 2. A trend 3. Seasonal element 4. Cyclical elements 5. Random variation 6. Autocorrelation Cyclical factors more difficult to determine bc the time span may be unknown or the cause of the cycle may be unknown. Cyclical demand can come from political elections, war, economic conditions or sociological pressures Random Variables are caused by chance events (normally found last, the unexplained portion of demand) Autocorrelation is the value expected at any point is highly correlated with its own past values Trend lines are the starting point in developing a forecast Time series Analysis: a type of forecast in which data relating to past demand are used to predict future demand Past data may include several components such as trend, seasonal or cyclical influences. Forecasting short term i s under 3 months (used for tactical decisions such as how much inventory to restock or the employees schedule)Short term is good for measuring the current
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