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Demand Forecasting_Methods (Part I)

# Demand Forecasting_Methods (Part I) - DemandForecasting...

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Demand Forecasting Methods, Part I

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Demand plot First thing to do when analyzing demand is to plot it versus time. Then look if There is a trend: Can you fit a trend line through the data? Can be done using “add trendline” then “linear” in Excel There is seasonality: is there a recurring pattern in the data? Often it can be seen more easily by connecting the dots. The number of periods between 2 successive occurrences of the pattern is called a season (even if it is a week or a month). 2
Regular vs lumpy demand Regular demand: The demand plot has one of the following 4 patterns: No trend, no seasonality Trend, no seasonality No trend, seasonality Trend and seasonality 3

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Regular vs lumpy demand Lumpy demand: Demand is intermittent and has very high uncertainty. Demand plot does not have any of the 4 patterns In this case, statistical forecasting methods do not work well. 4
5 CR (2004) Prentice Hall, Inc. Some Forecasting Method Choices Historical projection ü Moving average ü Exponential smoothing Causal or associative ü Regression analysis Qualitative ü Surveys ü Expert systems or rule-based Collaborative

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Notation & timing We are now at the end of a time period (day, month, quarter) Let t denote the current time period
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