Chapter 3 Forecasting - Chapter3 Forecasting...

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Chapter 3 Forecasting
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    Ch 3: Forecasting Objective: Minimize uncertainty Important for making informed decisions Changing environment Components:             timing (when) quantity (how much)
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    Features of Forecasts Forecasts are not perfect Longer the time horizon the poorer the  forecast Past is a reliable indicator of the future
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    Elements of a Good Forecast Timely – time to respond Accuracy – Never perfect Reliability – Work consistently  Expressed in meaningful units – dollars and  units Simple to understand Cost-effective
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    The Forecasting Process Determine the purpose of the forecast Establish the time horizon Select a forecasting technique Obtain the data Make the forecast Monitor the forecast Take corrective action
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    Important aspects Forecasting Factors to consider when selecting a technique:  Time horizon: short, medium, long Level of aggregation – product Level of aggregation – time Accuracy desired  Cost Availability of data The  User
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    Purpose of Forecasts Business Planning Financial Planning Market planning Production plan Production scheduling Inventory planning - purchasing Manpower planning
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    Types of Forecasts Demand forecasts Environmental forecasts  economic environment political environment  Tech forecasts – technology  Consumer confidence
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     Forecasting Techniques                      Techniques Qualitative Methods Quantitative Methods Correlation Regression  Time Series Opinion s Surveys
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     Forecasting Techniques 1. Qualitative Methods: Opinions and hunches Executive opinions Sales force opinions Economists Surveys Consumer surveys Delphi method
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    Forecasting Methods  Advantages:    Good for long term forecasts    Ability to incorporate factors          that are difficult to quantify    Ability to combine many factors Disadvantages:    Personal Bias   Poor accuracy             Lack of precision
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     Forecasting Method s (continued) 2.
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