Kaizen
Kaizen
Kaizen
Group-2
A forecast is an estimate of a future event
achieved by systematically combining and
casting forward in a predetermined way data
about the past.
Forecasting
Techniques
Delphi
Naive
Method
Moving
Historical Data Average
Weighted
Nominal group technique Moving Average
Exponential
Smoothing
Trend Analysis
Causal
Methods Seasonality
Simple Analysis
Regression
Analysis Multiplicative
Decomposition
Multiple
Regression
Analysis
1. Qualitative – incorporates judgmental &
subjective factors into forecast.
2. Time-Series – attempts to predict the future
by using historical data.
3. Causal – incorporates factors that may
influence the quantity being forecasted into the
model
Delphi method
Iterative group process allows experts to
make forecasts
Participants:
decision makers: 5 -10 experts who make the
forecast
staff personnel: assist by preparing,
distributing, collecting, and summarizing a
series of questionnaires and survey results
respondents: group with valued judgments
who provide input to decision makers
Nominal group technique (NGT) is a
structured method for group brainstorming
that encourages contributions from everyone.
When some group members are much more vocal
than others.
When some group members think better in silence.
When there is concern about some members not
participating.
When the group does not easily generate quantities
of ideas.
When all or some group members are new to the
team.
When the issue is controversial or there is heated
conflict.
Materials needed: paper and pen or pencil for each
individual, flipchart, marking pens, tape.
1. State the subject of the brainstorming. Clarify
the statement as needed until everyone
understands it.
2. Each team member silently thinks of and writes
down as many ideas as possible in a set period of
time (5 to 10 minutes).
3. Each member in turn states aloud one idea.
Facilitator records it on the flipchart.
4. Discuss each idea in turn. Wording may be
changed only when the idea’s originator agrees.
Ideas may be stricken from the list only by
unanimous agreement. Discussion may clarify
meaning, explain logic or analysis, raise and
answer questions, or state agreement or
disagreement.
5. Prioritize the ideas using multivoting or list
reduction.
Time Series Method
◦ Naïve
Whatever happened
recently will happen
again this time (same
Ft Yt 1
time period)
The model is simple
and flexible
Provides a baseline to Ft Yt 4 : Quarterly data
measure other models
Attempts to capture Ft Yt 12 : Monthly data
seasonal factors at the
expense of ignoring
trend
Wallace Garden Supply
Forecasting
Storage Shed Sales
25
20
15
Actual Value
Sheds
Naïve Forecast
10
0
February March April May June July August September October November December
Period
Time Series Method
◦ Moving Averages
Assumes item
forecasted will stay
steady over time.
Technique will smooth
out short-term
irregularities in the time
series.
k
k - period moving average (Actual value in previous k periods) /k
k 1
Wallace Garden Supply
Forecasting
Storage Shed Sales
Actual
Period Value Three-Month Moving Averages
January 10
February 12
March 16
April 13 10 + 12 + 16 / 3 = 12.67
May 17 12 + 16 + 13 / 3 = 13.67
June 19 16 + 13 + 17 / 3 = 15.33
July 15 13 + 17 + 19 / 3 = 16.33
August 20 17 + 19 + 15 / 3 = 17.00
September 22 19 + 15 + 20 / 3 = 18.00
October 19 15 + 20 + 22 / 3 = 19.00
November 21 20 + 22 + 19 / 3 = 20.33
December 19 22 + 19 + 21 / 3 = 20.67
Wallace Garden Supply
Forecasting 3 period moving average
Actual Value - Forecast
25
20
15
Actual Value
Value
Forecast
10
0
1 2 3 4 5 6 7 8 9 10 11 12
Time
• Time Series Method
– Weighted Moving Averages
• Assumes data from some periods are more
important than data from other periods (e.g.
earlier periods).
• Use weights to place more emphasis on some
periods and less on others.
Actual
Period Value Weights Three-Month Weighted Moving Averages
January 10 0.222
February 12 0.593
March 16 0.185
April 13 2.2 + 7.1 + 3 / 1 = 12.298
May 17 2.7 + 9.5 + 2.4 / 1 = 14.556
June 19 3.5 + 7.7 + 3.2 / 1 = 14.407
July 15 2.9 + 10 + 3.5 / 1 = 16.484
August 20 3.8 + 11 + 2.8 / 1 = 17.814
September 22 4.2 + 8.9 + 3.7 / 1 = 16.815
October 19 3.3 + 12 + 4.1 / 1 = 19.262
November 21 4.4 + 13 + 3.5 / 1 = 21.000
December 19 4.9 + 11 + 3.9 / 1 = 20.036
Month 1 2 3 4 5
Demand ('00s) 13 17 19 23 24
The two month moving average for months two to five is given by:
Exponential Smoothing
Actual
Period Value Ft α At Ft Ft+1
January 10 10 0.1
February 12 10 + 0.1 *( 10 - 10 ) = 10.000
March 16 10 + 0.1 *( 12 - 10 ) = 10.200
April 13 10 + 0.1 *( 16 - 10 ) = 10.780
May 17 11 + 0.1 *( 13 - 11 ) = 11.002
June 19 11 + 0.1 *( 17 - 11 ) = 11.602
July 15 12 + 0.1 *( 19 - 12 ) = 12.342
August 20 12 + 0.1 *( 15 - 12 ) = 12.607
September 22 13 + 0.1 *( 20 - 13 ) = 13.347
October 19 13 + 0.1 *( 22 - 13 ) = 14.212
November 21 14 + 0.1 *( 19 - 14 ) = 14.691
December 19 15 + 0.1 *( 21 - 15 ) = 15.322
Wallace Garden Supply
Forecasting Exponential smoothing
25
20
15
Sh ed s
Actual value
Forecast
10
0
Trend analysis
◦ technique that fits a trend equation (or curve) to a series of
historical data points.
◦ projects the curve into the future for medium and long
term forecasts.
Seasonality analysis
◦ adjustment to time series data due to variations at certain
periods.
◦ adjust with seasonal index – ratio of average value of the
item in a season to the overall annual average value.
◦ example: demand for coal & fuel oil in winter months.
Sales(in units) vs. Time
Time
Least Squares Method
^
Y a bX
Where
^
Y = predicted value of the dependent variable (demand)
_ _
a = Y-axis intercept
[ XY - n X Y ]
b=
b = slope of the regression line 2
_
2
X - n X
Midwestern Manufacturing Company
Forecasting Linear trend analysis
160
140
y = 10.536x + 56.714
120
100
Value
80
60
40
20
0
1 2 3 4 5 6 7
Tim e