FARE 3310 Chapter Notes - Chapter 4: Linear Regression, Mean Squared Error, Average Absolute Deviation
7 Dec 2013
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Forecast is one of most important business functions because all other business decisions are based on a forecast of future. Make decisions like which market to pursue, products to produce, mow much inventory to carry etc. Poor forecasting results in incorrect business decisions which leave company unprepared to meet future demands: costly consequences (like loss of sales) Process of predicting a future event: rarely perfect, most techniques assume underlying stability in system, product family/aggregated forecasts more accurate than individual product forecasts. Short-range forecast: up to 1 year (usually less than 3 months, purchasing, job scheduling, workforce levels, job assignments, production levels, more accurate than long-term forecasts. Medium-range forecasts: 3 months-3 years, sales and production planning, budgeting, deal with more comprehensive issues/support management decisions regarding planning/products, plants and processes. Long-range format: 3+ years, new product planning. Economic forecasts: address business cycle inflation rate, money supply, housing starts. Technological forecasts: predict rate of technological progress, impacts development of new products.
