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FORECASTING

Forecasting

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Page 1: Forecasting

FORECASTING

Page 2: Forecasting

FORECASTINGForecasting is essential for a number of

planning decisions.Long term decisionsNew product introductionPlant expansion

Page 3: Forecasting

MEDIUM TERM DECISIONSAggregate production planningMan power planningInventory policy

SHORT TERM DECISIONS:• Production planning • Scheduling of job orders

Page 4: Forecasting

PLANNING PROCESSA forecast of demand is an essential input for

planning.

System to be managed

System objectiv

es

Plan of action

Constraints budget/space

ResourcesMen/materials

Demand forecast

Page 5: Forecasting

METHODS OF FORECASTING(A) subjective or intuitive methods-opinion polls, interviews-Delphi(B) Methods based on averaging of past data-moving averages -exponential smoothing

Page 6: Forecasting

(C) Regression models on historical data-trend extrapolation(D) Causal or economic models(E) time- series analysis using stochastic

models- Box Jenkins Models

Page 7: Forecasting

FORECASTING Objective Scientific Free from ‘bias’ Reproducible Error analysis possible

PREDICTION Subjective Intuitive Individual bias Non reproducible Error analysis limited

Page 8: Forecasting

NORMAL PATTERNS OF DEMANDConstantLinear trendCyclicSeasonal pattern with growth

Page 9: Forecasting

ABNORMAL DEMAND PATTERNS

Transient impulse sudden risesudden fall

Page 10: Forecasting

OPINION POLLSPersonal interviewsEg: aggregation of opinion of sales representatives to obtain

sales forecast of a region. Knowledge base (experience) Subjective bias Questionnaire method Questionnaire design Choice of respondents Obtaining respondents Analysis and presentation of results (forecasting) Telephonic conversation Fast DELPHI

Page 11: Forecasting

DELPHIA structured method of obtaining responses from experts

Utilizes the vast knowledge base of expertsEliminates subjective bias and ‘influencing’

the members through anonymityIterative in character with statistical

summary at end of each round (generally 3 rounds)

Consensus (or divergent view points) usually emerge at the end of the exercise.

Page 12: Forecasting

DELPHI

Coordinator

meanmedianstandard deviatiom

1990 1995 2000 2005 2010

year

Expert 1

Expert 2

Expert n

Page 13: Forecasting

DELPHIROUND 1

ROUND 2

ROUND 3

Page 14: Forecasting

DELPHI-moving to divergent points

Round 1

Round 2

Round 3


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