Forecasting

* FORECASTING

(LECTURE I)

* OVERVIEW

Operations Planning begins with a forecast of the future demand for a business organization’s products, which could be goods or service. To provide the future projection, forecasting methods are anchored on the basic premise that past trends will continue in the future time periods, and as such, the past data represent basis to predict the future demand.

* WHAT IS FORECASTING?

* FORECASTING -

* It is the science of predicting states of the future.

* It is a prediction of what will occur in the future.

* It is an uncertain process.

* APPROACHES OF FORECASTING

* I. QUALITATIVE FORECASTING -

* Subjective method of forecasting.

* These are based on judgment, opinion, past experiences or best guesses.

Examples:

1. Collective Opinion Method

2. Delphi Technique

* Collective Opinion Method -

* It is a method which collects opinions from individuals in an organization regarding the future demand for a given product.

* This may include people from the Marketing and Sales Department (internal) or consultants (external).

* Collected summary of information (SOI) provides the basis for forecasting.

* Delphi Technique -

STEPS:

1. Preparation of questionnaires.

2. Distribution of questionnaires to subjects.

3. Participants answer the questionnaires.

4. Returning of answered questionnaires.

5. Committee compiles the results.

6. Development and distribution of the result.

*This may be repeated until a consensus is achieved.

* II. QUANTITATIVE FORECASTING -

* Objective methods of forecasting.

* Forecasts are based on mathematical formulas.

* It generally assume that the same underlying causal system that existed in the past will continue to exist in the future.

* COMPONENTS OF FORECASTING DEMAND

The type of forecasting method to use depends on several factors, including the:

1. time frame of the forecast

2. demand...