Ch.4 Forecasting

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Forecasting

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31 Terms

1

Forecasting

The art and science of predicting future events.

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2

Economic forecasts

Planning indicators that are valuable in helping organizations prepare medium- to long-range forecasts.

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3

Technological forecasts

Long-term forecasts concerned with the rates of technological progress.

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4

Demand forecasts

Projections of a company’s sales for each time period in the planning horizon.

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5

Quantitative forecasts

Forecasts that employ mathematical modeling to forecast demand.

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6

Qualitative forecasts

Forecasts that incorporate such factors as the decision maker’s intuition, emotions, personal experiences, and value system.

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7

Jury of executive opinion

A forecasting technique that uses the opinion of a small group of high-level managers to form a group estimate of demand.

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8

Delphi method

A forecasting technique using a group process that allows experts to make forecasts. three different types of participants in the Delphi method: decision makers, staff personnel, and respondents.

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9

Sales force composite

A forecasting technique based on salespersons’ estimates of expected sales.

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10

Market survey

A forecasting method that solicits input from customers or potential customers regarding future purchasing plans.

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11

Time-series

A forecasting technique that uses a series of past data points to make a forecast.

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12

Naive approach

A forecasting technique that assumes that demand in the next period is equal to demand in the most recent period.

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13

Moving-average

A forecasting method that uses an average of the n most recent periods of data to forecast the next period.

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14

Exponential smoothing

A weighted-moving-average forecasting technique in which data points are weighted by an exponential function.

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15

Smoothing constant

The weighting factor used in an exponential smoothing forecast, a number greater than or equal to 0 and less than or equal to 1.

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16

Mean absolute deviation

(MAD) A measure of the overall forecast error for a model.

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17

Mean squared error

(MSE) The average of the squared differences between the forecasted and observed values.

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18

Mean absolute percent error

(MAPE) The average of the absolute differences between the forecast and actual values.

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19

Trend projection

A time-series forecasting method that fits a trend line to a series of historical data points and then projects the line into the future for forecasts.

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20

Seasonal variations

Regular upward or downward movements in a time series that tie to recurring events.

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21

Cycles

Patterns in the data that occur every several years.

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22

Linear regression analysis

A straight-line mathematical model to describe the functional relationships between independent and dependent variables.

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23

Standard error of the estimate

A measure of variability around the regression line—its standard deviation.

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24

Coefficient of correlation

A measure of the strength of the relationship between two variables.

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25

Coefficient of determination

A measure of the amount of variation in the dependent variable about its mean that is explained by the regression equation.

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26

Multiple regression

An associative forecasting method with more than one independent variable.

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27

Tracking signal

A measurement of how well a forecast is predicting actual values.

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28

Bias

A forecast that is consistently higher or consistently lower than actual values of a time series.

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29

Adaptive smoothing

An approach to exponential smoothing forecasting in which the smoothing constant is automatically changed to keep errors to a minimum.

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30

Focus forecasting

Forecasting that tries a variety of computer models and selects the best one for a particular application.

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31

Stagger chart

A short-term rolling forecast that is easily prepared, discussed, and evaluated.

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