Week 11 Summary

This set of flashcards covers essential vocabulary and concepts related to forecasting in business, including definitions and explanations for various methods and components.

Forecasting

The process of predicting a future event.

Short-range forecast

Forecasts that cover a time horizon of up to 1 year, generally less than 3 months.

Medium-range forecasting

Forecasts that span 3 months to 3 years, often related to sales and production planning.

Long-range forecast

Forecasts that extend beyond 3 years, typically for new product planning and research.

Economic forecasts

Predictions that address the business cycle, including inflation rate and money supply.

Technological forecasts

Predictions regarding the rate of technological progress that affect product development.

Demand forecasts

Predictions of sales for existing products and services.

Jury of executive opinion

A qualitative forecasting method that pools opinions from high-level experts.

Delphi method

A qualitative forecasting approach using a panel of experts who are queried iteratively.

Time-Series Forecasting

A quantitative method based on past values obtained at regular time intervals.

Trend Component

A persistent, overall upward or downward pattern in data.

Seasonal Component

Patterns of up and down fluctuations occurring within a single year.

Cyclical Component

Repeating up and down movements affected by external cycles and trends.

Random Component

Erratic, nonsystematic fluctuations due to random variation or unforeseen events.

Naive Approach

A forecasting method that assumes demand in the next period will be the same as in the most recent period.

Exponential Smoothing

A forecasting technique that uses weighted averages where weights decline exponentially.

Mean Absolute Deviation (MAD)

A measure of forecast error comprising the average of absolute differences between forecasted and actual values.

Coefficient of Correlation

A statistical measure that indicates the degree of association between two variables.

Tracking Signal

A measure that evaluates how well the forecast predicts actual values, calculated by the ratio of cumulative forecast errors to MAD.

Qualitative forecasting

Forecasting method that relies more on subjective judgment than on numerical data.

Quantitative forecasting

Forecasting method that uses mathematical models and historical data to predict future values.