...Introduction to Management Science, 10e (Taylor) Chapter 15 Forecasting 1) A trend is a gradual, long-term, up or down movement of demand. Answer Diff: 1 Page Ref: 682 Main Heading: Forecasting Components Key words: trend, forecasting components 2) A seasonal pattern is an up-and-down repetitive movement within a trend occurring periodically. Answer Diff: 2 Page Ref: 682 Main Heading: Forecasting Components Key words: seasonal pattern, forecasting components 3) Random variations are movements that are not predictable and follow no pattern. Answer Diff: 2 Page Ref: 682 Main Heading: Forecasting Components Key words: random variations, forecasting components 4) The basic types of forecasting methods include time series, regression, and qualitative methods. Answer Diff: 2 Page Ref: 683 Main Heading: Forecasting Components Key words: types of forecasting methods 5) Time series is a category of statistical techniques that uses historical data to predict future behavior. Answer Diff: 1 Page Ref: 683 Main Heading: Forecasting Components Key words: time series analysis 6) Regression methods attempt to develop a mathematical relationship between the item being forecast and factors that cause it to behave the way it does. Answer Diff: 2 Page Ref: 683 Main Heading: Forecasting Components Key words: regression methods 7) Qualitative methods use management judgment, expertise, and opinion...
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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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...Study Guide for Chapter 5: 1. What does the acronym CPFR represent? a. | Coordinated planning and forecasting relationships | b. | Collaborative planning, forecasting, and replenishment | c. | Centralized purchasing and forecasting relationships | d. | Collaborative purchasing, forecasting, and receivables | 2. Some measures of forecasting accuracy include mean absolute deviation, mean absolute percentage error, and mean squared error. The formula for each is dependent on the forecast error, which is calculated by using the equation: a. | Actual demand for period t divided by the forecasted demand for period t | b. | Actual demand for period t plus the forecasted demand for period t | c. | Actual demand for period t minus the forecasted demand for period t | d. | The average of Actual demand for period t and forecasted demand for period t | Data Set E1 Period | Sales Volume | 1 | 10000 | 2 | 12400 | 3 | 14250 | 4 | 15750 | 5 | 20500 | 6 | 18500 | 7 | 15750 | 8 | 20500 | 9 | 21500 | 10 | 22550 | 3. Using Data Set E1, what would be the forecast for period 7 using a four period moving average: (Choose the closest answer.) a. | 17625 | b. | 15225 | c. | 15300 | d. | 17250 | 4. Using Data Set E1, what would be the forecast for period 6 using a five period weighted moving average? The weights for each period are 0.05, 0.10, 0.20, 0.30, and 0.35 from the oldest period to the most recent period, respectively...
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...rain? The best plans had two essential ingredients: First, everyone worked to the same plan; second, all pertinent information was included in that plan. In the business world, there are many methods of forecasting product demand, and they must include all known information. Extrinsic forecasting methods involve factors such as economic conditions, market trends, competition, government regulations, or the sale of related goods. These techniques look for patterns or correlations linking product demand with these outside factors. Qualitative forecasting techniques most often are used for extrinsic forecasting. They are employed by senior managers and involve using good judgment, intuition, and informal opinions. Qualitative forecasting is necessary for products where no previous sales data exist. Intrinsic forecasting, on the other hand, uses data from previous sales, and the forecast is developed using that sales history. This quantitative forecasting is done by most members of a supply chain, especially those near the final consumer. Many factors can be included in the forecast along with traditional methods to improve forecast reliability. Principle 2: Forecasts must include some measure of error. The forecast is going to be wrong—but by how much? Estimates of forecast error can be made by studying past performance. This then can be used to plan extra capacity...
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...The Accuracy of Demand Forecasting Between Point of Sale and Order History Supply Chain Management TBS908 Table of Contents 1. Executive Summary 4 2. Company Profile 4 3. Demand 5 3.1 Demand Forecasting 6 3.2 Demand Forecasting Methods 6 3.2.1 Opinion Polling / Qualitative Method (subjective): 6 3.2.2 Statistical Methods/Quantitative Approach (objective): 6 4. Order History Vs. Point-of-sale 8 5. Planning Promotions 8 5.1 Promotion Planning and Supply Chain Contracting in a High-Low Pricing Environment 9 5.1.1 Basic Household Inventory Model: 9 6. Types of demand forecast in GCC and UAE 10 7. Objective 10 8. Methodology 11 Table 3 13 Figure 1 13 9. Result 14 10. Recommendations 14 11. Conclusion: 15 11. References 16 12. Appendixes 17 Appendix I 17 Appendix II 19 1. Executive Summary Demand forecasting is essentially anticipating future prospects by reviewing historical data in the most calculated way in an uncontrollable environment. Foreseeing what and when buyers will purchase has never been a simple procedure for producers or retailers. Troubled by the overwhelming undertaking of correctly coordinating supply with interest, makers are always enhancing procedures to accomplish the most noteworthy estimate exactness that will guarantee when the customer enters a store, the item they are searching for is on the rack. This is getting significantly tricky as the uncertainty level increase. In the below report the demand...
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...NOVA SOUTHEASTERN UNIVERSITY The Wayne Huizenga Graduate School of Business and Entrepreneurship-Master's ProgramS Assignment for Course: QNT 5040- Business Modeling Submitted to: Dr. Tom Griffin Submitted by: Prince A. Storr ps44@nova.edu Date of Course Meeting: November 18, 2011 Date of Submission: November 18, 2011 Title of Assignment: Greaves Brewery: 10 Month Forecasting CERTIFICATION OF AUTHORSHIP: I certify that I am the author of this paper and any assistance that I received in its preparation is fully acknowledged and disclosed in the paper. I have also cited any sources from which I used data, ideas, or words, either quoted directly or paraphrased. I also certify that this paper was prepared by me specifically for this course. Student Signature: Prince A Storr Instructor(s Grade on Assignment: Instructor(s Comments: Greaves Brewery: Ten Month Sales Forecasting Case Synopsis Alex Benson, purchasing manager for Greaves Brewery in Trinidad was faced with a dilemma in early 2004. He encountered difficulty in forecasting sales for 2004; particularly because of the 2003 slump, government excise taxes and other factors such as decreased numbers in both tourist arrivals to the Caribbean island and beer exports to the U.S. As purchasing manager, Benson’s prime responsibility was maintaining adequate inventory levels for all goods and materials used in the company’s production processes, including the purchase of new bottles and...
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...packaged goods. There are no magical algorithms, forecasting tools, or proprietary process solutions that offer much more than a "like as" or analog-based planning solution. The companies that do the best job in forecasting new ¡Hnáucts work the details in a methodical way, challenge underlying assumptions, and examine all available data to givei: PATRICK BOWER Mr. Bower is Senior Director of Corporate Planning & Customer Service at Combe Incorporated, producer of high-quality personal care products. He is a frequent writer and speaker on supply chain subjects, and is a self-professed "S&OP geek." Prior to Combe, he was with a consulting firm where he worked for clients such as Diageo, Bayer, Glaxo Smith Kline, Pfizer, Foster Farms, Farley's and Sather, Cabot Industries, and American Girl. His experience also includes employment at Cadbury, Kraft Foods, Unisys, and Snapple. He has been twice recognized as a "Pro to Know" by Supply atid Detnand Chain Executive magazine. He is also the recipient of the IBF 2012 award for "Excellence in Business Forecasting & Planning." His expertise includes S&OP, demand planning, inventory, network optimization, and production scheduling. Copyright ©2013 Journal of Business Forecasting 1 All Rights Reserved I Winter 2012-2013 ne of the toughest demand planning tasks is forei goods world. Why? First, we don't really have good math tg^nnelp us. It would be great if there were a forecasting algorithm that reads consurriefs'' minds, but there...
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...[pic] Item Forecasting and Inventory Management MANAGEMENT CONSULTING CASE 2: L. L. BEAN INC. Q1. How do L.L. Bean use past demand data and a specific item forecast to decide how many units of that item to stock? Ans. L. L. Bean use two main methods based on past demand data to determine on the quantities to be ordered for specific items to stock. Method One The First Method of forecasting is based on quite a conservative approach, primarily manual. Product related people sit together and decide on the basis of previous/book record. They look for dollar sales of each item and rank them on this basis. They also look for the forecasted quantity of items and check it with real sold quantity. But when they have to add a new item, they find that this item will create incremental demand or will cannibalize the sales of any other item. If they find cannibalization then they adjust the quantity of items accordingly. But this method is not the same all the time and can be changed accordingly, as per the need. Method Two The Second Method of forecasting uses historical forecast errors which is called the A/F Ratio i.e. (Actual Demand / Forecast Demand). |A/F Ratio |Remarks | |A=F |Forecast was perfect | |A>F ...
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...materials which greatly increases the durability of the component and at a lower cost. They continue to sell the original product (“Classic”) to a number of equipment manufacturers and hardware supply chains but in smaller quantities. They have seen a dramatic growth in demand for the new product (“DuraBear”). Two factors have led to the company not employing any formal forecasting techniques. One of these is the sudden change in product mix, the other is the rapid growth has focused their attention on building capacity. The President of the company, Mr. Ralph Wada, has recognized the need for a more formal forecasting process as the company matures. He has expressed an opinion that forecasting should be as simple as possible and yet still meet the needs of the business. Mr. Wada wants to use the start of the new fiscal year (May 1) to initiate a more formal forecasting system. He has decided to focus on the two main bearing products which comprise 90% of their revenue. With no existing expertise in demand forecasting he has turned to a small consulting firm to recommend appropriate forecasting techniques, prepare a forecast for the next four months, and provide advice and training to an identified NCC employee in the Operations organization. Ms Ronnie Havens has exhibited an interest in statistical applications and has taken some courses in college which will serve as a foundation for taking on this new responsibility. Mr. Wada has also asked other staff members...
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...Forecasting Forecasting is one of the most important business functions because all other business decisions are based on a forecast of the future. Poor forecasting results in incorrect business decisions and leaves the company unprepared to meet future demands. The consequences can be very costly in terms of lost sales and can even force a company out of business. Forecasts are so important that companies are investing billions of dollars in technologies that can help them better plan for the future. For example, the ice-cream giant Ben & Jerry’s have invested in business intelligence software that tracks the life of each pint of ice cream, from ingredients to sale. Each pint is stamped with a tracking number that is stored in an Oracle database. Then the company uses the information to track trends, problems, and new business opportunities. They can track such things as seeing if the ice-cream flavor Chocolate Chip Cookie Dough is gaining on Cherry Garcia for the top sales spot, product sales by location, and rates of change. This information is then used to more accurately forecast product sales. Numerous other companies, such as Procter & Gamble, General Electric, Lands’ End, Sears, and Red Robin Gourmet Burgers, are investing in the same type of software in order to improve forecast accuracy. (R. Dan Reid & Nada R. Sanders, 2009) It is not possible to accurately forecast the future. Because of the qualitative nature of forecasting, a business can come up with different...
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...size of the market share and drivers of demand. It is also important how often major components fail and sent for repair. If a failed major components is beyond repair, it needs to be replaced with a new system. Followed by surveys and consultation of their customers. They are interested in finding out how changing customers demand for their products. Lastly the strategies which includes availability and reliability of data, right forecasting model, customer collaboration, sales and operations planning process and the measurement of forecast error. 3) What are the findings? ⇨ Due to relatively low demand and MRO, forecasting demand in the Aerospace and Defense industry is very challenging. The industry is currently going through major evolution in its forecasting practices in an effort to drive down cost and enhance service. Demand for new product and better services are further putting pressure on the A and D companies to improve forecast period. A concerted effort in enhancing data collection, statistical forecasting, customer collaboration and sales operations planning is required to achieve this goal. 4) What is the relevance of the study? 5) What is your opinion with regard to the ideas...
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...Two factors have led to the company not employing any formal forecasting techniques. One of these is the relative short existence of the company, the other is the rapid growth has focused their attention on building capacity. The President of the company, Mr. Anup Kumar, has recognized the need for a more formal forecasting process as the company matures. He has stated the objective of employing forecasting that is as simple as possible and yet still meets the needs of their business. As the consultant assigned to this project you are expected to perform the following tasks: 1. Identify possible demand forecasting techniques for the two products, 2. Recommend the most appropriate technique for each product, 3. Develop a weekly demand forecast for the two products for the next four weeks, 4. Explain any patterns and any extraordinary items in the demand data, 5. Explore appropriate measures of forecast error and forecast control tools, 6. Suggest any ideas which might help Ms. Morgan quickly learn the basics of forecasting. Table 1. Sales and Marketing Demand (in thousands, forecast by Marketing) WEEK | PRODUCT 1 SALES | PRODUCT 1 DEMO/PROMO | PRODUCT 2 SALES | PRODUCT 2 DEMO/PROMO | 1 | 25.2 | 2 | 8.0 | .2 | 2 | 27.0 | 1 | 7.6 | .1 | 3 | 28.5 | 1 | 8.2 | .3 | 4 | 30.0 | 1 | 9.2 | .4 | 5 | 32.0 | 2 | 8.4 | .2 | 6 | 33.5 | 2 | 8.2 | .2 | 7 | 35.0 | 1 | 8.2 | .3 | 8 | 38.5 | 1 | 9.4 | .4 | 9 | 62.0* | 2 | 8.4 | .3 | ...
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...elements Past data Autocorrelation Question 2.2. (TCO 5) In most cases, demand for products or services can be broken into several components. Which of the following is considered a component of demand? (Points : 3) Forecast error Autocorrelation Previous demand Consistent demand Repeat demand Question 3.3. (TCO 5) Which of the following forecasting methodologies is considered a causal forecasting technique? (Points : 3) Exponential smoothing Weighted moving average Linear regression Historical analogy Market research Question 4.4. (TCO 5) Which of the following forecasting methods uses executive judgment as its primary component for forecasting? (Points : 3) Historical analogy Time series analysis Panel consensus Market research Linear regression Question 5.5. (TCO 5) In business forecasting, what is usually considered a long-term time period? (Points : 3) Three months or longer Six months or longer One year or longer Two years or longer Ten years or longer Question 6.6. (TCO 5) In general, which forecasting time frame best identifies seasonal effects? (Points : 3) Short-term forecasts Quick-time forecasts...
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...Assignment 1 Question 1: The customer order decoupling point is described as the point at which demand changes from independent to dependant (unit 2). What does this mean and why is this important to managers? This means that the customer order decoupling point (CODP) is the point at time which the company has to allocate resources(such as timing and quantity of material) in order to serve the final consumer(the independent demand that now becomes dependent) requests. Different environments are defined according to different CODP, they are: * The Make-to-stock (MTS) environment has its CODP in the finished goods inventory, it means that the buyer will buy the product directly from the inventory. The focus of the demand management is providing finished goods when and where the customers want them. In order to have assure these customer service (control) said before, the demand management have to plan inventory levels that will supply the demand correctly(planning) using and providing forecast (information). * In the Assemble-to-order (ATO) environment, the CODP is when the consumer decide what already produced components he wants and the company would then assemble them to complete the consumer's order. In order to meet delivery dates (control), the demand management has to determinate these delivery dates (planning). The demand management also has to know if the components can (or can't) be combined in a viable product, it means: see if the combination asked by the...
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...SUBJECT: Forecasting and Sales for our Widget Manufacturing line As we have discussed earlier in the day, we have a 60 % accuracy with our sales forecast rate and we are reviewing ways to close the gap between 60% and 100%. In this memo I have written out what our current outlook looks like from the beginning to end of our production cycle and what forecasting methods I believe we can use to improve forecasting accuracy. Our current process: Components Vendor C On Site in Factory Vendor A Vendor B Steel for Widget takes 4 weeks Widget is made 1 week Plastic cover 3 weeks Card Board shipping box 4 weeks Packaging Packaging Department Shipping Receives the covers and applies them and puts the product in the packaging takes 1 day Shipping takes 3 Weeks Time Stamp: The customer places his order on 01/01/2015 and does not need it to be at his business until 03/31/2015. 01/01/2015 Customer places order 02/02/2015 Steel for the Widgets is ordered 01/09/2015 Ordered Card Board Shipping boxes 01/09/2015 Ordered Plastic covers 03/02/2015 Make the widgets 03/09/2015 • widgets are finished, • plastic covers come in • boxes come in, • apply boxes and plastic covers to the widgets • prepare to ship 03/10/2015 Ship Widgets to customer 03/31/2015 Customer receives the widgets The Steel was ordered in early February and planned to be at the Manufacturing plant in time to complete the widget assembly for the beginning of the second week in March. Packaging and shipping...
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