Module I_Forecasting

Module I_Forecasting - Module I Part 2 Production...

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IELM120 Module I Part 2 1 Production Management
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IELM120 Introduction 2 Production is the creation of goods and services. - Materials - Goods - Capital - Services - Manpower Production management Attempt to match supply with demand for a product or service by determining the appropriate quantities and timing of inputs, transformation, and outputs. Production Inputs Outputs
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IELM120 Major Types of Activities Operations management may be separated into two types of activities To run the production efficiently and effectively Module 1 Part 2 Methodology: Demand forecasting Production planning Inventory control Material requirements planning (MRP) To improve the operations system Module 1 Part 3 3
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IELM120 4 Forecasting
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IELM120 Learning Objectives Understand commonly used forecasting techniques Learn to evaluate forecasts Learn to choose appropriate forecasting techniques 5
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IELM120 What is Forecasting Predicting what is going to happen in the future Weather forecasts Economic forecasts Demand forecasts Basis of all business decisions Production Inventory Personnel Facilities Capacity 6 ??
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IELM120 Forecast and Planning Horizons 7 Short-term Detailed plans: Demand Forecasting Job assignments Production lot size Order quantities Quantitative methods Short Term Intermediate Term Long Term Now 2 months 1 Year Intermediate-term Demand Forecasting Aggregate planning Capacity planning Mixture of quantitative methods and judgment Long-term R&D Plant Location Layout Product design Principally judgment- based
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IELM120 Characteristics of Forecasts Forecasts are usually wrong. Long-term forecasts are less accurate than short- term forecasts (forecast horizon is important) Aggregate forecasts are more accurate Choosing appropriate aggregation levels, time horizons, and forecasting techniques is crucial 8
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IELM120 Long-term Forecasts are Often Wrong! 9 The telephone is a toy no one would want to use.” Rutherford B. Hayes, 1876 There is no reason for any individual to have a computer in his home.” Ken Olsen, 1977 The world market for computers is 5.” Thomas J. Watson, 1948 “The phonograph is not of any commercial value.” Thomas A. Edison, 1880
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IELM120 Operations Reversal at Benetton 10 Dyeing Knitting Knitting Dyeing Point of differentiation moved here
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IELM120 Forecast Accuracy 11 16 17 18 19 20 Aug-02 Sep-02 Oct-02 Nov-02 Dec-02 Actual Forecast 1 Forecast 2 Sales • Which forecast is better?
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Module I_Forecasting - Module I Part 2 Production...

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