...Forecasting Assignment Name University of Phoenix Operations Management – MGT 554 Instructor Date Forecasting Assignment Forecasting assists managers (companies) to help predict future demand. Demand management is important because companies can increase value or productivity and reduce costs. Chase, Jacobs, & Aquilano (2005) state, “the purpose of demand management is to coordinate and control all sources of demand so the productive system can be used efficiently and the product delivered on time” (p. 512). When a manager is choosing a forecast method, the manager must analyze the cost of doing the forecast and the opportunity cost of using inaccurate data. In addition, Chase, et al. (2005) state “the manager must look at the following factors: (1) Time horizon to forecast, (2) Data availability, (3) Accuracy required, (4) Size of forecasting budget, and (5) Availability of qualified personnel ( p. 518). This paper will compare and contrast three forecasting methods (Delphi Method, Box Jenkins Technique, and Econometric Models) used by managers to help predict future demand as well as explain how the National Basketball Association (NBA) uses forecasting methods to forecast demand under conditions of uncertainty. The Delphi method is a qualitative technique. Chase, et al. (2005) defines qualitative techniques as “subjective or judgmental and are based on estimates and opinions (p. 513). The Delphi method according to Chase et al., is when a group of experts responds...
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...CHAPTER SEVEN Discussion Questions 1. What role does forecasting play in the supply chain of a build-to-order manufacturer such as Dell? Although Dell builds to order, they obtain PC components in anticipation of customer orders and therefore they rely on forecasting. This forecast is used to predict future demand, which determines the quantity of each component needed to assemble a PC and the plant capacity required to perform the assembly. 2. How could Dell use collaborative forecasting with its suppliers to improve its supply chain? Collaborative forecasting requires all supply chain partners to share information regarding parameters that might affect demand, such as the timing and magnitude of promotions. Dell could share with their components suppliers all of the promotions, e.g., holiday, back-to-school, etc., they have planned. These suppliers could, in turn, notify their suppliers of discrete components that a spike in demand is anticipated. These demand forecasts for end items determine the demand for components and coupled with knowledge of fabrication times, allows all members of the supply chain to provide the right quantity at the right time to their customers. 3. What role does forecasting play in the supply chain of a mail order firm such as LL Bean? LL Bean has historically operated almost exclusively in a make-to-stock mode and with very few exceptions, stocked products that did not go out of style as rapidly as many other clothing...
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...What is Forecasting? Forecasting is the process of making statements about events whose actual outcomes have not yet been observed. Forecasting can be seen as a planning tool for managers to attempt to cope with the uncertainty of the future. Managers are constantly trying to predict the future, making decisions in the present that will ensure the continued success of their firms. Managers use forecasts for budgeting purposes. A forecast aids in determining volume of production, inventory needs, labor hours required, cash requirements, and financing needs. A variety of forecasting methods are available. However, consideration has to be given to cost, preparation time, accuracy, and time period. The manager must understand clearly the assumptions on which a particular forecast method is based to obtain maximum benefit. 1 Types of Forecasts Short Term Short-range forecasts typically encompass the immediate future and concern the day to day operations of a firm. A short-term forecast usually only covers a period of a few months and can be considered an “operating” forecast. Medium Term Medium-range forecasts typically span a few months up to a year. A forecast of this length can be considered “tactical” in nature. Long Term Long-range forecasts typically encompass a period longer than 1 to 2 years. These forecasts are considered strategic and are generally related to management’s attempt to plan new products or build new facilities. 2 Forecasting Methods Time Series ...
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...What is Forecasting? Forecasting is the process of making statements about events whose actual outcomes have not yet been observed. Forecasting can be seen as a planning tool for managers to attempt to cope with the uncertainty of the future. Managers are constantly trying to predict the future, making decisions in the present that will ensure the continued success of their firms. Managers use forecasts for budgeting purposes. A forecast aids in determining volume of production, inventory needs, labor hours required, cash requirements, and financing needs. A variety of forecasting methods are available. However, consideration has to be given to cost, preparation time, accuracy, and time period. The manager must understand clearly the assumptions on which a particular forecast method is based to obtain maximum benefit. 1 Types of Forecasts Short Term Short-range forecasts typically encompass the immediate future and concern the day to day operations of a firm. A short-term forecast usually only covers a period of a few months and can be considered an “operating” forecast. Medium Term Medium-range forecasts typically span a few months up to a year. A forecast of this length can be considered “tactical” in nature. Long Term Long-range forecasts typically encompass a period longer than 1 to 2 years. These forecasts are considered strategic and are generally related to management’s attempt to plan new products or build new facilities. 2 Forecasting Methods Time Series ...
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...direct the work of operations managers. The two major types of forecasts are qualitative and quantitative. Within each of these types are multiple methods and models. Qualitative forecasts are based upon subjective data. Quantitative forecasts are derived from objective data. Both methods are not suitable for all situations and circumstances. Each has inherent strengths and weaknesses. The forecaster must understand the strengths and shortcomings of each method and choose appropriately. One example of forecasting is the United States Marine Corps use of forecasting techniques, both qualitative and quantitative, to predict ammunition requirements. Forecasting Defined Forecasting is “A statement about the future†(Anonymous, 2005). Operations management is designed to support forecasted performances and events. Specifically, operations managers allocate personnel, time, and resources in order to meet the demands of forecasts. The most successful companies achieve their results by assuming just such a proactive vice reactive posture. While forecasting is widely used, it does not fit into a standard one size fits all model. Multiple proven methods and models exist. In this paper we will examine, compare, and contrast the two most commonly used methods, qualitative and quantitative forecasting. Lastly, as a case study, we will examine how the United States Marine Corps forecasts its fiscal year ammunition requirements. Qualitative Forecasting Qualitative forecasts are the...
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...QUESTION TWO (i) Human resources forecasting involves projecting labor needs and the effects they’ll have on a business. Human Resource department forecasts both short and long term staffing needs based on projected sales, office growth, attrition and other factors that affect a company’s need for labor. Potential human resource requirement is to be estimated keeping in view of the organisation's plans over a given period of time. It involves estimating the future human resource requirement of right quality and right number. Human Resource Forecasting provides Various benefits to the organisation like; * Production and Scheduling Human resource forecasting plans for labor needs change as sales rise and fall. For that human resources manager should keep in close touch with sales manager to be aware of any spikes or declines in sales that affect labor needs. This prevents falling behind on order fulfillment or paying idle workers. A simple example of labor forecasting is a restaurant that has nights with many bookings and large parties and other nights when few diners make reservations. The manager forecasts the restaurant’s wait staff, bar and kitchen needs. * Succession Human resources forecasting helps to avoid long-term holes in staffing needs by keeping on top example employees might be retiring, leaving or asked to leave. Using that information, Human Resource managers plans to fill holes with internal staff or prepares for a quick recruiting effort. * Budgeting...
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...marketing has been the increased application of marketing decision support system (MDSS) technology to aid with decision-making (DM). Developing a sound and robust marketing strategy has never been an easy task. The success or failure of a company’s marketing effort depends on the interaction of numerous internal and external factors, combined with the knowledge and intuition of the decision-makers themselves. Marketing DM requires a comprehensive analysis of environments both inside and outside the firm. It requires a wide range of strategic information, including hard and soft information, and it requires managers to deal with issues that involve a high degree of uncertainty, subjectivity and ambiguity. Marketing also involves managers’ intuition, judgment, and personal vision. These characteristics of marketing decisions present a real challenge to decision-makers. While managers certainly possess specific strengths and advantages in handling such decisions, they are often nonetheless limited by their knowledge and background, a lack of the analytical skills necessary to undertake...
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...companies on a daily basis. Forecasting allows managers to plan according to future events and be prepared to use the system accordingly. With a prediction of the future managers reduce uncertainty and develop plans. The historical data is put together and analyzed to determine forecast events. All large companies use forecasting to make important strategic business decision. This helps them save costs and manage their resources effectively. A firm that is prepared for future occurences will have a healthy financial position. Forecast is of great use to a company because it affects several departments throughout the company. Some of the departments affected are: accounting and finance, marketing, operations, human resources, and information systems. Budgeting, sales, production, inventory control, capacity planning, and purchasing make use of forecasting. Accounting and finance use the data collected to estimate future costs, predict profit or loss, and identify resources available. The marketing department uses forecasting to predict prices and create promotions. The operations of a company is able to run smoothly because job schedules, production schedules, capacity planning, inventory planning, and detecting outsourcing needs are predicted ahead of time. Human resources also benefits from forecasting because seasonal or cyclical hiring is scheduled ahead of time. The company’s information systems are being monitored and revised to keep up with the forecasting results. There are...
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...Published in Graham J. Hooley and Michael K. Hussey (Eds.), Quantitative Methods in Marketing, Second Edition. London: International Thompson Business Press, 1999, pp. 92-119. Forecasting for Marketing J. Scott Armstrong The Wharton School, University of Pennsylvania Roderick J. Brodie Department of Marketing, University of Auckland Research on forecasting is extensive and includes many studies that have tested alternative methods in order to determine which ones are most effective. We review this evidence in order to provide guidelines for forecasting for marketing. The coverage includes intentions, Delphi, role playing, conjoint analysis, judgmental bootstrapping, analogies, extrapolation, rule-based forecasting, expert systems, and econometric methods. We discuss research about which methods are most appropriate to forecast market size, actions of decision makers, market share, sales, and financial outcomes. In general, there is a need for statistical methods that incorporate the manager's domain knowledge. This includes rule-based forecasting, expert systems, and econometric methods. We describe how to choose a forecasting method and provide guidelines for the effective use of forecasts including such procedures as scenarios. INTRODUCTION Forecasting has long been important to marketing practitioners. For example, Dalrymple (1987), in his survey of 134 U.S. companies, found that 99 percent prepared formal forecasts when they used formal marketing plans. In Dalrymple (1975)...
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...Chapter 13 Chapter 13 • Forecasting Forecasting TRUE/FALSE 1. The repeated observations of demand for a product or service in their order of occurrence form a pattern known as a time series. Answer: True Reference: Demand Patterns Difficulty: Easy Keywords: time series, repeated observations 2. One of the basic time series patterns is trend. Answer: True Reference: Demand Patterns Difficulty: Easy Keywords: time series, pattern, trend 3. One of the basic time series patterns is random. Answer: True Reference: Demand Patterns Difficulty: Easy Keywords: time series, pattern, random 4. Random variation is an aspect of demand that increases the accuracy of the forecast. Answer: False Reference: Demand Patterns Difficulty: Easy Keywords: random variation, forecast accuracy 5. Aggregation is the act of clustering several similar products or services. Answer: True Reference: Key Decisions on Making Forecasts Difficulty: Moderate Keywords: aggregation, clustering 6. Aggregating products or services together generally decreases the forecast accuracy. Answer: False Reference: Key Decisions on Making Forecasts Difficulty: Moderate Keywords: aggregation, forecast accuracy 54 Copyright ©2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 13 • Forecasting 7. Judgment methods of forecasting are quantitative methods that use historical data on independent variables to predict demand. Answer: False ...
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...economics. First, the paper documents inaccuracy and risk in project management. Second, it explains inaccuracy in terms of optimism bias and strategic misrepresentation. Third, the theoretical basis is presented for a promising new method called "reference class forecasting," which achieves accuracy by basing forecasts on actual performance in a reference class of comparable projects and thereby bypassing both optimism bias and strategic misrepresentation. Fourth, the paper presents the first instance of practical reference class forecasting, which concerns cost forecasts for large transportation infrastructure projects. Finally, potentials for and barriers to reference class forecasting are assessed. The American Planning Association Endorses Reference Class Forecasting In April 2005, based on a study of inaccuracy in demand forecasts for public works projects by Flyvbjerg, Holm, and Buhl (2005), the American Planning Association (APA) officially endorsed a promising new forecasting method called "reference class forecasting" and made the strong recommendation that planners should never rely solely on conventional forecasting techniques when making forecasts: "APA encourages planners to use reference class forecasting in addition to traditional methods as a way to improve...
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...Rock Cafe - Forecasting" 1. Describe three different forecasting applications at Hard Rock. Name three other areas in which you think Hard Rock could use forecasting models. Hard rock café divide the forecast in long term methods where the expectations are to establish a better capacity plan and short term methods where they look for good contracts with suppliers for leather goods (clothes etc.) and definately to be more negotiable with the suppliers of food products. Also hard rock café pays attention to potencial revenues using pricing and costing information of every café. Short term of sales forecasts are calculated each month by every established site. Forecasting models could be useful in other areas like: 1. New food product and its impact. Will they be accepted by the consumers? (Long term,Strategic) 2. Human Resource forecasting. Are they good enough on what they are doing or could it be more efficient in another way? (Medium term,Operating) 3. Forecasting economic information like economic crisis or growth. 4. Opening new establishments. Is the market big enough? (Long term, Strategic) 2. What is the role of the POS system in forecasting at Hard Rock? The Point Of Sale system collects diary data of almost every consumer in every single café. That means huge information if we check out the number of visitors in almost every Hard rock Café. Furthermore this huge information means even more benefits if the managers are able to...
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...DEMAND FORECASTING: EVIDENCE-BASED METHODS Forthcoming in the Oxford Handbook in Managerial Economics Christopher R. Thomas and William F. Shughart II (Eds.) Subject to further revisions File: Demandforecasting-17-August-2011-clean.docx 17 August 2011 J. Scott Armstrong The Wharton School, University of Pennsylvania 747 Huntsman, Philadelphia, PA 19104, U.S.A. T: +1 610 622 6480 F: +1 215 898 2534 armstrong@wharton.upenn.edu Kesten C. Green International Graduate School of Business, University of South Australia City West Campus, North Terrace, Adelaide, SA 5000, Australia T: +61 8 8302 9097 F: +61 8 8302 0709 kesten.green@unisa.edu.au # words in body 10,053 (requested range was 6,000 to 9,000) ABSTRACT We reviewed the evidence-based literature related to the relative accuracy of alternative methods for forecasting demand. The findings yield conclusions that differ substantially from current practice. For problems where there are insufficient data, where one must rely on judgment. The key with judgment is to impose structure with methods such as surveys of intentions or expectations, judgmental bootstrapping, structured analogies, and simulated interaction. Avoid methods that lack evidence on efficacy such as intuition, unstructured meetings, and focus groups. Given ample data, use quantitative methods including extrapolation, quantitative analogies, rule-based forecasting, and causal methods. Among causal methods, econometric methods are useful given good theory, and few key...
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...Manager’s Guide to Forecasting by David M. Georgoff and Robert G. Murdick Harvard Business Review Reprint 86104 J A N U A RY– F E B R U A RY 1 9 8 6 HBR Manager’s Guide to Forecasting David M. Georgoff and Robert G. Murdick E arly in 1984, the Houston-based COMPAQ Computer Corporation, manufacturer of IBMcompatible microcomputers, faced a decision that would profoundly affect its future. Recognizing that IBM would soon introduce its version of the portable computer and threaten COMPAQ’s dominance in this profitable market, the company had two options. It could elect to specialize in this product line and continue to market its highly regarded portables aggressively, or it could expand market offerings to include desktop microcomputers. The latter move would force the year-old company to confront IBM on its home ground. Moreover, COMPAQ would have to make a substantial investment in product development and working capital and expand its organization and manufacturing capacity. COMPAQ’s management faced several important unknowns, including the potential market’s size, structure, and competitive intensity. Management recognized that the company’s vitality might seriously erode if it did not expand its product line. If the expansion were successful, COMPAQ might enjoy economies of scale that could help ensure its survival in a dynamic and very competitive industry. If COMPAQ’s market assumptions were incorrect, however, its future might be bleak. Many of today’s...
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...540 Week 4 Discussions Please respond to the following: * Choose one of the forecasting methods and explain the rationale behind using it in real-life. Adjusted exponential smooth is the exponential smoothing forecast with a trend factor added to it. It can adjust with the trend factor (Beta) with a high beta reflecting changes more than a low beta. In real life example such as forecasting computer sales based on at least one year of sales data helps management. By using exponential smoother factor (alpha) we will react and adjust more slowly as the value reaches 0. As alpha gets higher we will have a more positive effect on demand and the forecast will be for an increase. The initial smoothing constant alpha and the trend factor beta are set by the manager with a value from 0 to 1. It is adjusted accordingly and a comparison of the results is use in the forecast. * Describe how a domestic fast food chain with plans for expanding into China would be able to use a forecasting model. When a fast food chain plans to expand into china the use of forecasting methods will greatly enhance the company’s chances of success. For instance, they include integrated information system and real time exchange of information with its suppliers. Demand can be based on information of its demand for locations with at least 12 months of sales data. A labor management system could also use forecasting methods. What is the difference between a causal model and a time- series model? Give...
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