COMM 205 Chapter 3: Chapter 3 Demand Forecasting
Document Summary
Forecasts are vital inputs for the design and operation of the productive systems because they help managers anticipate the future. Forecasting horizons are classified into long, medium, and short term. Forecasting techniques can be classified as judgmental or quantitative. Judgmental methods rely on judgment, experience, and expertise of executives, sales staff, experts, or consumers to formulate forecasts. The judgmental methods include executive opinions, sales force estimates, consumer surveys, historical analogies, and expert opinions. Quantitative techniques use precise numerical calculations to develop forecasts. Two major quantitative approaches are described: time series and associative (casual) techniques. Associative techniques such as regression attempt to explicitly identify influencing factors and to incorporate that information into equations that can be used for predictive purposes. Measures of forecast accuracy include mean absolute deviation (mad), mean squared. Error (mse), and mean absolute percent error (mape). Control of forecasts involves deciding whether a forecast is performing adequately, using, for example, a control chart.
