Forecasting Part 1

Forecasting Part 1 - Operations Management DS 412...

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Operations Management DS 412 Introduction to Forecasting
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Forecasting Process of predicting what will happen in the future Ex. Demand for a product or service Forms basis for all planning decisions Ex. How any units to produce Level of workforce to maintain Amount of inventory to hold Process is uncertain Every effort must be made to forecast as accurately as possible
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Forecasting and Planning Time Horizon Type of Planning Volume of Forecasts Cost of Errors Long Range (one year or longer) Capacity Planning Location Planning New product introduction Major capital purchases Low High Medium Range (three months to one year) Aggregate production planning Seasonal inventory policy Overtime policy Workforce levels Amount of subcontracting Higher Lower Short Range (up to three months) Parts inventory management Scheduling of operations Personnel scheduling Maintenance planning High Low
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Forecasting Methods Qualitative Human Judgment Jury of Executive Opinion Delphi Method Sales Force Composite called “Grassroots" or Bottom up” estimate Customer Surveys Q u a n ti t v e M h m
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When to Use Qualitative Methods? When there is little or no relevant data available. When the environment is likely to be unstable. When the time horizon is long.
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Jury of Executive Opinion Experts meet as a group and share knowledge. Goal is consensus: reach agreement on a forecast. Ex. Forecast of overall company sales for next year. Potential problems: May be strong differences of opinion, no consensus reached. Personality conflicts and/or turf battles. Subordinates may hesitate to give opinions which may conflict with superiors.
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Delphi Method Group of experts provide forecast and rationale anonymously in response to questions from a moderator. Ex. How will the personal computer look like in ten years?
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Forecasting Part 1 - Operations Management DS 412...

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