Business Math 101 - pt3
Business Math 101 - pt3
Business Math 101 - pt3
A Short Primer on
Demand Forecasting
◆ Qualitative Techniques
– Non-quantitative forecasting techniques based on expert
opinions and intuition. Typically used when there are no
data available.
◆ Time Series Analysis
– Analyzing data by time periods to determine if trends or
patterns occur.
◆ Causal Relationship Forecasting
– Relating demand to an underlying factor other than time.
Non-quantitative techniques
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*image taken from user Stephanie Barber on Pinterest.com
Forecasting Techniques and Common Models
Exhibit 9.2a
◆ Qualitative Techniques
– Non-quantitative forecasting techniques based on expert
opinions and intuition. Typically used when there are no
data available.
◆ Time Series Analysis
– Analyzing data by time periods to determine if trends or
patterns occur.
◆ Causal Relationship Forecasting
– Relating demand to an underlying factor other than time.
Components of Demand
AQUILANO
CHASE
chapter 9 Forecasting
11
PowerPoint
*image taken from Fundamentals of Operations Management
Presentation (c)
Historical Monthly Product Demand Consisting of
a Growth Trend, Cyclical Factor, and Seasonal Demand
Exhibit 9.4
Exhibit 9.3
Exhibit 9.5a
= At -1 + At - 2 ! + At - n
Ft n
Ft = Forecasted sales for the period
At-1 = Actual sales in period t-1
n = Number of periods in the moving average
Exhibit 9.6
Exhibit 9.7
Exhibit 9.2b
◆ Sources of Error
– Projection of past trends into the future when conditions change
– Bias errors
» Consistent mistakes causing a forecast to be too high or too low:
wrong relationships, wrong trend line, errors in shifting seasonal
demand, undetected trends.
– Random errors
» Unexplainable variations (noise) in a forecast that cannot be
explained by the forecast model.
◆ Leading Indicator
– An event whose occurrence causes, presages or influences the
occurrence of another subsequent event.
» Warning strips on the highway
» Prerequisites to a college course
» An engagement ring
» Summer heat and beer sales
Exhibit 9.15
Y = a + bX
Y = Dependent variable to be solved for
a = Y intercept
b = Slope of the XY relationship
X = Independent variable (e.g., units of time)
Y = a + bx + by + bz
Examples:
• advertising media mix
• macro econometric models
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Five years of sales, by week: what’s going on here?
10000
9000
8000
7000
Sales in 1
thousand 6000 9
units 5000
4000
3000
2000
1000
0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53
Week of the Year
30
Quarterly Cycle
5,000
4,000
3,000
2,000
1,000
0
1 3 5 7 9 11 13 15 17 19 21 23 25 of
Week 27the
29Year
31 -33 35 37 39 41 43 45 47 49 51
1994
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Long term trend?
6,000
Sales in Units
4,000
2,000
0
1 9 17 25 33 41 49 57 65 73 81 89 97105113121-129
Weeks 137145
1994 153161169177
through 185193201209217225233241249
1998
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