What techniques do we use to develop usable forecast in an uncertain world?
A forecast is a statement about the future value of a variable of
interest. Elements of a good forecast include timely, accurate, reliable,
meaningful in units, in writing, simple to understand, and cost
effective. The steps in the forecasting process include determine the
purpose of the forecast, establish a time horizon, select a forecasting
technique, obtain/clean/analyze appropriate data, make the forecast,
and monitor the forecast. We can use qualitative forecasting, which
permits the inclusion of soft information such as human factors,
personal opinions, and hunches. These factors are difficult to quantify.
Although they cannot be measured, that doesn’t mean they are less
useful. Techniques include time series forecasting, various kinds of
expert opinions, focus groups, and Adelphi model. Quantitative
forecasting involves either the projection of historical data or the
development of associative methods that attempt to use causal
variables to make a forecast. These techniques rely on hard data.
There are averaging techniques, which smoothes fluctuations in a time
series, trend and seasonal techniques, Trend: Analysis of trend
involves developing an equation that will suitably describe trend
(assuming that trend is present in the data.) Seasonal: Regularly
repeating upward or downward movements in series values that can
be tied to recurring events. It may refer to regular annual variations.
There is also Regression, which is a technique used for fitting a line to
a set of points.
What concerns do we need to address in assessing the utility of a forecast?
We need to address the accuracy and control of forecasts. These are
very vital, so forecasters want to minimize forecast errors. . In order to
measure forecast accuracy and control, we can use mean average
deviation, mean squared error, and mean average percentage error.
Cost and accuracy are also major factors. Other factors to include are
the availability of historical data, the availability of computer software,
and the time needed to gather and analyze data to prepare the
We discussed the importance of designing product/service, capacity, process, and
work systems. How do these interrelate and what is their relative importance?
The importance of work system design is underscored by an
organization’s dependence on human efforts to accomplish its goals.