Documente Academic
Documente Profesional
Documente Cultură
Quality Management
Strategic Decisions (some)
Design of Products Process Selection Capacity and
and Services and Design Facility Decisions
Forecasting
What is forecasting?
Types of forecasts
Time-Series forecasting
Naïve
Moving Average
Exponential Smoothing
Regression
Good forecasts
What is Forecasting?
3 months to 2 years
Sales/production planning
Long-range forecast
> 2 years Design
of system
New product planning Qualitative
Methods
Forecasting During the Life Cycle
Time
Qualitative Forecasting Methods
Qualitative
Forecasting
Models
Sales Delphi
Executive Market
Force Method
Judgement Research/
Composite
Survey
Smoothing
Qualitative Methods
Briefly, the qualitative methods are:
.
Quantitative Forecasting Methods
Quantitative
Forecasting
2. Moving 3. Exponential
1. Naive
Average Smoothing
a) simple a) level
b) weighted b) trend
c) seasonality
Quantitative Forecasting Methods
Quantitative
Forecasting
2. Moving 3. Exponential
1. Naive
Average Smoothing
a) simple a) level
b) weighted b) trend
c) seasonality
Time Series Models
Random Trend
Seasonal Composite
Product Demand over Time
Demand for product or service
Actual
Random demand line
variation
Year Year Year Year
1 2 3 4
Now let’s look at some time series approaches to forecasting…
Borrowed from Heizer/Render - Principles of Operations Management, 5e, and Operations Management, 7e
Quantitative Forecasting Methods
Quantitative
Time Series
Models
Models
2. Moving 3. Exponential
1. Naive
Average Smoothing
a) simple a) level
b) weighted b) trend
c) seasonality
1. Naive Approach
A t + A t -1 + A t -2 + ... + A t -n 1
Ft 1 =
n
Weights
decrease for older data
sum to 1.0 Simple moving
average models
weight all previous
periods equally
Ft 1 = w1A t + w 2 A t -1 + w 3A t -2 + ... + w n A t -n 1
2b. Weighted Moving Average: 3/6, 2/6, 1/6
Week Demand
1 820 Given the weekly demand
2 775 data what are the exponential
3 680 smoothing forecasts for
4 655 periods 2-10 using a=0.10?
5 750
6 802 Assume F1=D1
7 798
8 689
9 775
10
3a. Exponential Smoothing – Example 1
Ft+1 = Ft + a(At - Ft)
i Ai Fi
How to choose α
depends on the emphasis you want to place
on the most recent data
Weights
a= Prior Period 2 periods ago 3 periods ago
a a(1 - a) a(1 - a)2
a= 0.10
10% 9% 8.1%
a= 0.90 90% 9% 0.9%
To Use a Forecasting Method
t =1
MSE =
n
MAD Example A
t=1
t - Ft = 40 =10
MAD = 4
n
t =1 = 550 =137.5
MSE/RMSE Example MSE =
n 4
MSE 1 1,446
April 91 101 17 17 289 n = 241
6
-20 20 400
May 115 98 2b. Root Mean Squared Error
(RMSE)
-10 84 1,446
RMSE MSE
June 83 103
An accurate forecasting system will have small MAD,
MSE and RMSE; ideally equal to zero. A large error may
indicate that either the forecasting method used or the = SQRT(241)
parameters such as α used in the method are wrong.
Note: In the above, n is the number of periods, which is
=15.52
Forecast Bias
TS = Tracking Signal
Good tracking signal has low values
Quantitative
Forecasting
2. Moving 3. Exponential
1. Naive
Average Smoothing
a) simple a) level
b) weighted b) trend
c) seasonality
Exponential Smoothing (continued)
y=a+bx
where,
xy n x y
x
y
b
x nx
2 2
x
y
a y bx
Regression – Example
y = a+ b X b
xy n x y a y bx
x nx
2 2
MonthAdvertising Sales X 2 XY
January 3 1 9.00 3.00
February 4 2 16.00 8.00
March 2 1 4.00 2.00
April 5 3 25.00 15.00
May 4 2 16.00 8.00
June 2 1 4.00 2.00
July
TOTAL 20 10 74 38
General Guiding Principles for
Forecasting