heizer10_ch04_sg - 4 Forecasting Summary Forecasts cover...

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4 Forecasting Summary Forecasts cover three distinct periods of time: short range, medium-range, and long range. Short-range forecasts span up to one year, but generally last less than three months. These help plan purchasing, job scheduling, workforce levels, job assignments, and production levels. Medium-range forecasts are intermediate in nature and anticipate activity generally from three months to three years. Medium-range forecasts assist with sales planning, production planning and budgeting, cash budgeting, and analysis of various operating plans. A long-range forecast generally extends beyond three years. These guide planning for new products, capital expenditures, facility location and expansion, and research and development. Three features distinguish medium and long-range forecasts from short-range forecasts: 1. Intermediate and long-range forecasts provide information for more comprehensive issues and support management decisions regarding planning and products, plants, and processes. While some forecasts of demand should extend over multiple planning horizons, intermediate and long- term forecasts will also include information obtained from economic and technological forecasts. 2. Short-term forecasts usually employ different methodological techniques than those used for longer-term forecasting. Many of these techniques are quantitative. In contrast, medium to long- range forecasting generally may employ qualitative, broader approaches. 3. Short-range forecasts tend to be more accurate than longer-range forecasts. As one attempts to look further in the future, forecast accuracy is likely to diminish. When forecasting sales, therefore, updates are needed frequently in order to review and revise plans as needed. Forecasts rely on either quantitative or qualitative methods. Qualitative forecasts primarily use data gathered from interviews, observation, and documents to assess decision-maker intuition, expressions of emotions, personal experience, and value systems. The four qualitative approaches to forecasting discussed here are jury of executive opinion, Delphi method, sales force composites, and consumer market surveys. Jury of executive opinion is an analysis of the opinion of a small group of high-level managers within the organization. The analyst synthesizes the results into a group estimate of demand. Under this method, the opinions of a group of high-level experts or managers, often in combination with statistical models, combine to arrive at a demand estimate. Jury of executive opinion tends to help grasp overall trends within an industry. The Delphi method also requires a group process, decision makers and poll experts (people whose judgment is valued and not necessarily employed by the organization), to make forecasts. Decision makers usually consist of a group of five to 10 experts who will make the actual forecast. Staff personnel assist the decision-makers by preparing, distributing, collecting, and summarizing a series of questionnaires and survey results. The Delphi method can be effective in developing long-range economic
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This note was uploaded on 11/24/2010 for the course DSIC 3152 taught by Professor B during the Fall '10 term at Fairleigh Dickinson.

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heizer10_ch04_sg - 4 Forecasting Summary Forecasts cover...

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