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MGT 302- Forecasting

# MGT 302- Forecasting - Today's Class Chapter 11 Forecasting...

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1 Today’s Class Chapter 11: Forecasting Quiz Overview Types of forecasting methods Time-series forecasting (I)

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2 Part I: Overview Operations Strategy Process Quality Capacity Inventory Forecasting Planning Scheduling What: Types How to generate: Time-series How to select Chapter 11: 11.1-11.6, 11.9 Class Notes and handouts
3 Part II: Types of Forecasting Methods Qualitative forecasting methods Based on subjective managerial judgment/ experience No specific mathematical models Quantitative forecasting methods Based on past data Utilize an underlying mathematical model

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4 Qualitative Forecasting When to use Relevant data not available, or Past data not reliable indicators of future conditions Major methods and characteristics (Table 11.2) Delphi technique Market surveys Life-cycles analogy Informed judgment Used for medium/long-range forecasting
5 Quantitative Forecasting Assumption Past data are reliable indicators of the future Methods Time-series methods (short/medium-range) Moving average Exponential smoothing Causal methods (medium/long-range) Develop a cause-and-effect model between demand and other variables Regression, econometric model, input-output model, simulation

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6 Part III: Time-series Forecasting Overview Types of forecasting methods Time-series forecasting (part I) Moving average techniques Exponential smoothing technique Measures of Forecast errors
7 Simplest method of time-series forecasting Simple moving average Weighted moving average Simple exponential smoothing Model D(t) = a + e Application Very short term forecast (e.g. use to forecast next period’s demand or a few periods into the future). Moving Average Techniques

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8 Week (t) Forecast Demand (F ) Actual Demand (D ) t t 1 2 3 4 5 6 19 20.7 ? 10 18 29 15 30 Example: Simple Moving Average Forecast the demand for wk 6 using 3-week Moving Average What are the potential mistakes that students could make?
9 Week (t) Forecast Demand (F ) Actual Demand (D ) t t 1 2 3 4 5 6 122 ? 100 90 140 130 130 Forecast the demand for wk 6 using weighted Moving Average: Let: W 1 = .4, W 2 = .3, W 3 = .2, W 4 = .1 Example: Weighted Moving Average What are the potential mistakes that students could make?

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Moving Average Techniques Weighted Moving Average: Idea: Place more weights to recent demand The more recent demand is considered more important than older demand Weighted average demand of the past N period , where W 1 ≥ W 2 ≥ W 3 …≥ W
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MGT 302- Forecasting - Today's Class Chapter 11 Forecasting...

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