Session5-6 - Supply Chain Modeling...

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Supply Chain Modeling Session 5-6: Forecasting Models Atalay Atasu
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Forecasting Forecasting Prediction is very difficult, Prediction is very difficult, especially if it's about the future. especially if it's about the future. Nils Bohr Nils Bohr
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http://www.exstatica.net/flash/psychic.swf Your Professor is a psychic!
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Objectives Give the fundamental rules of forecasting Calculate a forecast using a moving average, weighted moving average, and exponential smoothing Calculate the accuracy of a forecast
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What is forecasting? Forecasting is a tool used for predicting future demand based on past demand information.
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Why is forecasting important? Demand for products and services is usually uncertain . Forecasting can be used for… Strategic planning (long range planning) Finance and accounting (budgets and cost controls) Marketing (future sales, new products) Production and operations
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What is forecasting all about? Demand for Mercedes E Class Time Ja n Fe b Mar Apr May Jun Jul Aug Actual demand (past sales) Predicted demand We try to predict the future by looking back at the past Predicted demand looking back six months
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From the March 10, 2006 WSJ: Ahead of the Oscars, an economics professor, at the request of Weekend Journal, processed data about this year's films nominated for best picture through his statistical model and predicted with 97.4% certainty that "Brokeback Mountain" would win. Oops. Last year, the professor tuned his model until it correctly predicted 18 of the previous 20 best-picture awards; then it predicted that "The Aviator" would win; "Million Dollar Baby" won instead. Sometimes models tuned to prior results don't have great predictive powers. What’s Forecasting All About?
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An interesting quiz: http://www.funtrivia.com/playquiz/quiz282600205
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Some general characteristics of forecasts Forecasts are always wrong Forecasts are more accurate for groups or families of items Forecasts are more accurate for shorter time periods Every forecast should include an error estimate Forecasts are no substitute for calculated demand.
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Key issues in forecasting 1. A forecast is only as good as the information included in the forecast (past data) 2. History is not a perfect predictor of the future (i.e.: there is no such thing as a perfect forecast) REMEMBER: Forecasting is based on the assumption that the past predicts the future! When forecasting, think carefully whether or not the past is strongly related to what you expect to see in the future…
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Example: Mercedes E-class vs. M-class Sales Month E-class Sales M-class Sales Jan 23,345 - Feb 22,034 - Mar 21,453 - Apr 24,897 - May 23,561 - Jun 22,684 - Jul ? ? Question: Can we predict the new model M-class sales
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This note was uploaded on 01/25/2011 for the course MGT 4803 taught by Professor Staff during the Spring '08 term at Georgia Institute of Technology.

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Session5-6 - Supply Chain Modeling...

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