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MGT2070 - Ch. 3 - Forecasting.docx

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Department
Management
Course
MGT 2070
Professor
Barry Stannard
Semester
Fall

Description
MGT 2070: Operations Management September 19, 2012 Chapter 3: Forecasting  Forecast: a statement about the future value of a variable of interest such as demand o Cost/profit estimates, cash flow and funding, hiring/recruiting/training, pricing. Etc… o Helps  Plan the system (long-range)  Plan the use of the system (short/immediate-term) o Features  Assume a casual relationship  Rarely perfect due to randomness  More accurate for group vs. individuals  Accuracy decreases as time increases o Elements of a good forecast  Timely (reach the decision makers in time for them to be relevant)  Accurate  Meaningful units  Reliable & consistent  Organizationally compatible  Simple to understand & use  *See slides for Forecasting process*  How to chose a forecast technique: o Consider COST, ACCURACY o Consider availability of HISTORICAL DATA, COMPUTERS, TIME, FORECAST HORIZON  Time series: a time ordered sequence of observations taken at regular intervals of time obtained by observing dependent variable o Components  Level  Short-tern upward/downward movement of data  Trend  Gradual long-term movement  Seasonality  Regular variations in data  Peaks & troughs  Cycles  Wavelike variations lasting more than a year  Irregular variations  Caused by unusual circumstances  Random Variations  “Noise”  Naïve forecasts: for any period equals the previous period’s actual value o simple, no cost, quick, nonexistent data analysis, can be a standard for accuracy MGT 2070: Operations Management
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