MANGT 421 Lecture 4: Chapter 4 Review

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Forecasting Time Horizons
o Short-Range Forecast up to 1 year, usually less than 3 months
Purchasing, job scheduling, job assignments, production levels
Usually more accurate than long term
o Medium-Range Forecast 3 months to 3 years
Sales, production, planning, budgeting
o Long-Range Forecast 3 years or more
New product planning, facility location, research and development
Introduction and Growth require longer forecasts than maturity and decline in the
product life cycle
Types of Forecasts:
o Economic address business cycle, inflation rate, money and supply, housing
o Technological predict rate of technological progress, impacts development of
new products
o Demand predicts sales of existing products and services
Strategic Importance of Forecasting
o Supply Chain Management good supplier relations, advantages in product
innovation, cost and speed to market
o HR hiring, training, laying off
o Capacity Capacity shortages can result in undependable delivery, loss of
customers, loss of market share
The 7 Steps to Forecasting
o Determine the use
o Select items to be forecasted
o Determine the time horizon
o Select the models
o Gather data needed
o Make the forecast
o Validate and implement results
Product family and aggregated forecasts are more accurate than individual product
Forecasting Approaches
o Qualitative Methods used when situation is vague with little data
New products, new technology
Involves intuition and experience
o Quantitative Methods used when situation is stable and historical data exists
Existing products, current technology
Involves mathematical techniques
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