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Chapter 3

BUSI 2301 Chapter Notes - Chapter 3: Linear Regression, Data Analysis, Regression Analysis


Department
Business
Course Code
BUSI 2301
Professor
Inder S Mann
Chapter
3

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Chapter 3: Forecasting
A. What is forecasting?
-A forecast is a statement about the future
-Three uses for forecasting in operations:
oLT: design the system (types of products and services to offer,
capacities, eqpt, location)
oMedium term: use of the system (inv, workforce levels, planning
purchasing and production)
oST: 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
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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
oTime series – historical data assuing future will be the same
oAssociative 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
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