SCM 352: Forecasting (Midterms)

Process of predicting a future event.

Forecasting

What are the forecasting time horizons

• Short-range

• Medium-Range

• Long-range

• Up to 1 year or less.

• Purchasing, scheduling, staffing, and production

Short-Range Forecasting

• 3 months to 3 years

• Sales planning, production planning, and budgeting

Medium-Range Forecasting

• More than 3 years

• New products, facility locations, and research and development

Long-range Forecasting

Describe the steps used to develop a forecasting system.

• Determine the use of the forecast

• Select the items to be forecasted

• Determine the time horizon

• Select the forecasting model(s)

• Gather the data

• Make the forecast

• Validate and implement results

What are the general forecasting approaches?

• Qualitative

• Quantitative

• Used when situation is vague and little data exist.

• Involves intuition & experience.

Qualitative Methods

• Used when situation is 'stable' and historical data exists.

• Involves mathematical techniques

Quantitative Methods

What are the qualitative forecasting methods?

• Jury of Executive Opinion

• Delphi Method

• Sales Force Composite

• Consumer Market Survey

Predicts future values based on past values of the variable being forecasted, without using other explanatory variables.

Time-series model

Predicts future values using relationships between the variable being forecasted and other factors that influence it.

Associative model

What are components of time-series forecasting?

• Trend

• Seasonal

• Cyclical

• Random

Measures the strength and direction of the linear relationship between two variables.

correlation coefficient