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Forecasting Techniques in Operations Management

Chapter 8 of the document focuses on forecasting in operations management, emphasizing its strategic role in supply chain management and the importance of accurate demand predictions. It covers various forecasting methods, including qualitative and quantitative approaches, time series models, and regression analysis, as well as techniques for evaluating forecast accuracy. Additionally, the chapter discusses the use of Excel for creating forecast models and the impact of inaccurate forecasting on supply chain efficiency.

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6 views30 pages

Forecasting Techniques in Operations Management

Chapter 8 of the document focuses on forecasting in operations management, emphasizing its strategic role in supply chain management and the importance of accurate demand predictions. It covers various forecasting methods, including qualitative and quantitative approaches, time series models, and regression analysis, as well as techniques for evaluating forecast accuracy. Additionally, the chapter discusses the use of Excel for creating forecast models and the impact of inaccurate forecasting on supply chain efficiency.

Uploaded by

shamimleesa
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

Operations

Management
Chapter 8
Forecasting
Learning Objectives
• Discuss the strategic role of forecasting in supply chain
management
• Describe the forecasting process and identify the components of
forecasting demand
• Forecast demand using various time series models, including
exponential smoothing and trend and seasonal adjustments
• Discuss and calculate various methods for evaluating forecast
accuracy
• Use Excel to create various forecast models
• Develop forecasting models with linear and multiple regression
analysis
Forecasting
• Predicting the future
• Qualitative forecast methods
 Subjective
• Quantitative forecast methods
 based on mathematical formulas
• Quality Management
 Accurately forecasting customer demand is a key to providing good quality service
• Strategic Planning
 Successful strategic planning requires accurate forecasts of future products and
markets
Strategic Role of Forecasting in Supply
Chain Management
The Effect of Inaccurate Forecasting on
the Supply Chain
Components of Forecasting Demand
Forms of Forecast Movement
Forecasting Methods
Data Mining
Steps of the Forecasting Process
Moving Average
Smoothing Effects
Weighted Moving Average
Effect of Smoothing Constant

0.0 ≤ α ≤ 1.0
If α = 0.20, then Ft + 1 = 0.20 Dt + 0.80 Ft
If α = 0, then Ft + 1 = 0 Dt + 1 Ft = Ft
Forecast does not reflect recent data

If α = 1, then Ft + 1 = 1 Dt + 0 Ft = Dt
Forecast based only on most recent data
Exponential Smoothing (α = 0.30)
Linear Trend Line
y = a + bx b
 xy  nxy

where  x  nx
2 2

a = intercept a y  bx
b = slope of the line where
x = time period n = number of periods
y = forecast for demand for period x
x
 x
meanoft he x values
n

y
 y
meanoft he y values
n
Forecast Accuracy
Mean Absolute Deviation (MAD)
Comparison of Forecasts
Tracking Signal Plot
Statistical Control Charts (1 of 2)
Using  we can calculate statistical control limits for the forecast
error
Control limits are typically set at  3

 D
2
tt F

n 1
Mean squared error (MSE)
o Average of squared forecast errors
Statistical Control Charts (2 of 2)
Time Series Forecasting Using Excel
Regression Methods
Linear Regression
Correlation and Coefficient of
Determination
Data Mining

Uses for Data Mining


Tools for Data Mining

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