Forecasting.pptx - Forecasting IDS 355 FALL 2015 Demand Forecasting A forecast is a future estimate of one or more variables Weather Employment Economic

Forecasting.pptx - Forecasting IDS 355 FALL 2015 Demand...

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Forecasting IDS 355 FALL 2015
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Demand Forecasting A forecast is a future estimate of one or more variables: Weather Employment Economic growth Here, we are concerned with demand forecasting: The estimated future demand for aggregate sales or a single product May cover short times (days, shifts, hours) or long times (weeks, months, quarters, years) Useful for a wide range of business decisions C o p y r i g h t e d b y A . O u k s e l a n d D . L u n d q u i s t , 2 0 1 5
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Why is demand forecasting important? More accurate demand forecasts enable better business decisions How much output must be produced and shipped? How many workers do we need, and when? Do we need expanded production facilities? Ideal combination: Perfectly accurate forecasts Precisely scheduled production Completely reliable delivery of inputs and outputs Leads to meeting demand in exactly the demanded quantities C o p y r i g h t e d b y A . O u k s e l a n d D . L u n d q u i s t , 2 0 1 5
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Demand Forecasting Cycle Basic structure: Plan, execute, review Planning: Defining the forecast model and methods Selection of variables, model, and time frame Define data requirements Identify required resources Executing: Making the forecast Gather data Process data for forecast model Write and transmit reports Reviewing: Assessing performance Measure forecast accuracy Identify problems and successes: data, model, personnel Consider model updates, different data, or other changes C o p y r i g h t e d b y A . O u k s e l a n d D . L u n d q u i s t , 2 0 1 5
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Attributes of a Good Forecast Accuracy: Forecast closely estimates reality Remoteness: Forecasting farther into the future allows more time to adapt business processes Speed: Can be obtained quickly Cost: All else equal, cheaper is better Ease-of-use: Modeling techniques and output should be usable by the corresponding employees Forecasting inevitably requires trade-offs among these attributes: Speed vs. cost Accuracy vs. remoteness C o p y r i g h t e d b y A . O u k s e l a n d D . L u n d q u i s t , 2 0 1 5
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Forecasting and Big Data Using data requires: Gathering Cleaning Processing More data now than ever Often requires outsourcing Volume growing exponentially Competitive pressure C o p y r i g h t e d b y A . O u k s e l a n d D . L u n d q u i s t , 2 0 1 5
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Factors Driving Big Data Services Increasing computing power Computation speed Storage capacity Transmission rates More raw data: More variables Shorter measurement intervals More potential relationships Specialization and economies of scale C o p y r i g h t e d b y A .
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