In fact, forecasts are basic inputs for many kinds of decisions in business organizations. Consequently, it is important for all managers to be able to understand and use forecasts. Although forecasts are typically developed by the marketing function, the operations function is often called on to assist in forecast development. More important, though, is the reality that operations is a major user of forecasts. Chapter 3 provides important insights on forecasting as well as information on how to develop and monitor forecasts. | Forecasting McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. You should be able to: List the elements of a good forecast Outline the steps in the forecasting process Describe at least three qualitative forecasting techniques and the advantages and disadvantages of each Compare and contrast qualitative and quantitative approaches to forecasting Describe averaging techniques, trend and seasonal techniques, and regression analysis, and solve typical problems Explain three measures of forecast accuracy Compare two ways of evaluating and controlling forecasts Assess the major factors and trade-offs to consider when choosing a forecasting technique 3- Student Slides Forecast – a statement about the future value of a variable of interest We make forecasts about such things as weather, demand, and resource availability Forecasts are an important element in making informed decisions 3- Student Slides MAD weights all errors evenly MSE . | Forecasting McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. You should be able to: List the elements of a good forecast Outline the steps in the forecasting process Describe at least three qualitative forecasting techniques and the advantages and disadvantages of each Compare and contrast qualitative and quantitative approaches to forecasting Describe averaging techniques, trend and seasonal techniques, and regression analysis, and solve typical problems Explain three measures of forecast accuracy Compare two ways of evaluating and controlling forecasts Assess the major factors and trade-offs to consider when choosing a forecasting technique 3- Student Slides Forecast – a statement about the future value of a variable of interest We make forecasts about such things as weather, demand, and resource availability Forecasts are an important element in making informed decisions 3- Student Slides MAD weights all errors evenly MSE weights errors according to their squared values MAPE weights errors according to relative error 3- Student Slides Forecasts that project patterns identified in recent time-series observations Time-series - a time-ordered sequence of observations taken at regular time intervals Assume that future values of the time-series can be estimated from past values of the time-series 3- Student Slides These Techniques work best when a series tends to vary about an average Averaging techniques smooth variations in the data They can handle step changes or gradual changes in the level of a series Techniques Moving average Weighted moving average Exponential smoothing 3- Student Slides Technique that averages a number of the most recent actual values in generating a forecast 3- Student Slides The most recent values in a time series are given more weight in computing a forecast The choice of weights, w, is somewhat arbitrary and involves some trial and error 3- .
