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BUSI 2301 (13)
Chapter 3

CHAPTER 3.docx

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Carleton University
BUSI 2301
Inder S Mann

Chapter 3: Forecasting A. What is forecasting? - A forecast is a statement about the future - Three uses for forecasting in operations: o LT: design the system (types of products and services to offer, capacities, eqpt, location) o Medium term: use of the system (inv, workforce levels, planning purchasing and production) o ST: schedule the system (production, purchasing of supplies, staff scheduling) B. Common features of forecasts - Forecasts are rarely perfect - Assumes underlying system of the past will continue to exist in the future - Groups of items more accurate than individuals - Decrease as the time pd increases; flexible businesses benefit more from accurate short term forecasts) C. Elements of a Good Forecast - Timely - Accurate - Reliable - Meaningful - Compatible - Easy to understand and use D. Steps in forecasting process - Determine purpose of forecast - Establish a time horizon - Select a technique - Prep the forecast - Monitor it E. Approaches to forecasting - Judgemental – uses subjective inputs (historical but not precise numbers) - Quantitative – uses eqns o Time series – historical data assuing future will be the same o Associative models – uses casual (explanatory) variables to predict future F. Judgemental Forecasts - Executive opinions: used for LT planning and new product development - Sales force composite: sales staff has direct contact with customers - Consumer surveys: input from the customer - Historical analogies: use the demand for cranberry apple drink to forecast the demand for cranberry grape drink - Expert opinions (Delphi): experts complete questionnaires, usually used in technology G. Time series - A time ordered sequence of observations taken at regular intervals of time o Level – a
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