The forecast for period 11 was 124. Demand turned out to be 125, for an error of 125 124 1. This is within the limits of 8.66. If the next demand is 130 and the naive forecast is 125 (based on the period 11 demand of 125), the error is 5. Again, this is within the limits, so you cannot con-clude the forecast is not working properly. With more values—at least five or six—you could plot the errors to see whether you could detect any patterns suggesting the presence of nonrandomness. Problem 8 Problem 8 SolutionSolution1. What are the main advantages that quantitative techniques for forecasting have over qualitative techniques? What limitations do quantitative techniques have? 2. What are some of the consequences of poor forecasts? Explain. 3. List the specific weaknesses of each of these approaches to developing a forecast:a. Consumer surveys. b. Salesforce composite. c. Committee of managers or executives. 4. Briefly describe the Delphi technique. What are its main benefits and weaknesses? 5. What is the purpose of establishing control limits for forecast errors? 6. What factors would you consider in deciding whether to use wide or narrow control limits for forecasts? 7. Contrast the use of MAD and MSE in evaluating forecasts. 8. What advantages as a forecasting tool does exponential smoothing have over moving averages? 9. How does the number of periods in a moving average affect the responsiveness of the forecast? 10. What factors enter into the choice of a value for the smoothing constant in exponential smoothing? 11. How accurate is your local five-day weather forecast? Support your answer with actual data. 12. Explain how using a centered moving average with a length equal to the length of a season elimi-nates seasonality from a time series. 13. Contrast the terms salesand demand.DISCUSSION AND REVIEW QUESTIONS
Chapter Three Forecasting 12114. Contrast the reactive and proactive approaches to forecasting. Give several examples of types of organizations or situations in which each type is used. 15. Explain how flexibility in production systems relates to the forecast horizon and forecast accuracy. 16. How is forecasting in the context of a supply chain different from forecasting for just a single orga-nization? List possible supply chain benefits and discuss potential difficulties in doing supply chain forecasting.
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