311_Session16_Forecasting2

311_Session16_Forecasting2 - Operations Management Session...

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Unformatted text preview: Operations Management Session 16: Trend and Seasonality Session 16 Operations Management 2 Previous Lecture The importance of forecasting? Forecast Forecast is not a single number Error measure MAD Moving average Exponential smoothing Tradeoff: stability and responsiveness Session 16 Operations Management 3 Todays Lecture An application of the exponential smoothing method Risk-pooling effect again! Trend forecast Seasonal forecast Session 16 Operations Management 4 Forecasts and Probability Distributions: How many to stock? A firm produces Red and Blue T-Shirts 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 August September October Session 16 Operations Management 5 Forecasts and Probability Distributions ( = 0.3) Month T-Shirt Demand Forecast January 909.9 February 616.7 909.9 March 1073.3 821.94 April 1382.9 897.348 May 1359.5 1043.014 June 1519.9 1137.96 July 344.9 1252.542 August 929.7 980.2492 September 1328.5 965.0844 October 674 1074.109 November 954.0764 Session 16 Operations Management 6 Forecasts and Probability Distributions Suppose the company stocks 954 T-shirts, the forecasted number. What is the probability the company will have a stockout, that is, that there will not be enough T-shirts to satisfy demand? The company does not want to have unsatisfied demand, as that would be lost revenue. 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? Session 16 Operations Management 7 There is a Distribution Around the Forecasted Sale Standard Deviation of Error = 1.25 MAD Error is assumed to NORMALLY DISTRIBUTED with A MEAN (AVERAGE) = 0 STANDARD DEVIATION = 1.25* MAD Session 16 Operations Management 8 Forecasts and Probability...
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This note was uploaded on 11/09/2009 for the course BUAD 311 taught by Professor Vaitsos during the Fall '07 term at USC.

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311_Session16_Forecasting2 - Operations Management Session...

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