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CHAPTER 11

FORECASTING MODELS

SOLUTIONS TO DISCUSSION QUESTIONS

11-1. The steps that are used to develop any forecasting system are:
1. Determine the use of the forecast.
2. Select the items or quantities that are to be forecasted.
3. Determine the time horizon of the forecast.
4. Select the forecasting model.
5. Gather the necessary data.
6. Validate the forecasting model.
7. Make the forecast.
8. Implement the results.

11-2. A time-series forecasting model uses historical data to predict future trends.

11-3. The only difference between causal models and time-series models is that causal models take into account any factors that may influence the quantity being forecasted. Causal models use historical data as well. Time-series models use only historical data.

11-4. Qualitative models incorporate subjective factors into the forecasting model. Judgmental models are useful when subjective factors are important. When quantitative data are difficult to obtain, qualitative models are appropriate.

11-5. Least squares refers to holding the sum of the square of the difference between the observed values and the regression line to a minimum.

11-6. The disadvantages of the moving average forecasting model are that the averages always stay within past levels, and the moving averages require extensive record keeping of past data.

11-7. When the smoothing value, α, is high, more weight is given to recent data. When α is low, more weight is given to past data.

11-8. The Delphi technique involves analyzing the predictions that a group of experts have made, and then allowing the experts to review the data again. This process may be repeated several times. After the final analysis, the forecast is developed. The group of experts may be geographically dispersed.

11-9. MAPE is a measure for determining the accuracy of a forecasting model by

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