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Lecture 4

33:799:301 Lecture Notes - Lecture 4: Time Series, Business Cycle, Dependent And Independent Variables

Supply Chain Management
Course Code
A Taitt

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Chapter 2: Forecasting and Demand Planning
Forecasting and Demand planning are key building blocks from which all supply chain planning
activities are derived.
Step 1: Forecasting: where the forecast is developed through data analysis and
Eliminates future demand
Independent Demand → unrelated to the demand of other items
Dependent Demand → directly related to other product demands
(Demand is calculated)
Results may be inaccurate but still creates a baseline
Critical to “downstream” supply chain planning decisions
Good forecasting → can benefit a company and create more affected
Bad forecasting → if the forecasting is bad everything else in planning will
be bad
Forecasting is more accurate if its closer to the day that is forecasted
Goal: to minimize forecasting error while taking into account factors that
influence demand like market changes, seasonally, competitive activity,
Forecasting techniques:
Qualitative → based on opinion and intuition
Used when data is limited, unavailable, and not relevant
Personal insight→ based on the insight of the
most experience person. It’s fast and cheap but it is
Jury of Executive Opinion → a panel of
experiences individuals who have forecasting
meetings. Decisions are enriched and the company
saves money , but experts are biased.
Delphi Method → similar to jury of executive
opinion but collects data from each participate so
they don’t influence each other. Avoids groupthink
but is time consuming. Good for long term
Sales Force Estimation → Jury of Executive
Opinion but carried out by sales people. Sales
people are good at creating close contact with
customers but its not ideal for long term. Bias is
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