Demand Forecasting Definition An estimate of future demand

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Demand Forecasting.

Demand Forecasting.

. Definition. ․ ․ An estimate of future demand. A forecast can be determined

. Definition. ․ ․ An estimate of future demand. A forecast can be determined by mathematical means using historical, it can be created subjectively by using estimates from informal sources, or it can represent a combination of both techniques. - 2 -

Need • To reduce uncertainty. • To anticipate inventory and capacity demands. • To

Need • To reduce uncertainty. • To anticipate inventory and capacity demands. • To project costs of operations. • To improve competitiveness • To improve productivity by decreasing costs • To improve delivery and • To be responsive to customer needs.

Methods of Forecasting Qualitative Techniques. • Based on expert or informed opinion • Information

Methods of Forecasting Qualitative Techniques. • Based on expert or informed opinion • Information is intuitive and based on subjective judgment. • Techniques include collecting information from customer groups, experts, think tanks, research groups, etc.

Time Series Analysis • ․ It is based on the idea that data relating

Time Series Analysis • ․ It is based on the idea that data relating to past demand can be used to predict future demand. Past data may include trend, seasonal, or cyclical influences

Market Research • Market research is used mostly for looking new product ideas, like

Market Research • Market research is used mostly for looking new product ideas, like and dislikes about existing products, competitiveness of the existing products etc. Panel Consensus • Based on the idea that two heads are better than • A panel of people from a variety of positions develop forecast • Panel forecasts are developed through open meetings with free exchange of idea from all levels of management and individuals.

Delphi Method • The Delphi method hides the identity of the persons participating in

Delphi Method • The Delphi method hides the identity of the persons participating in the forecasting. Every person has the same weight. • A moderater produces a questionnaire and hand out it to participants. Their answers are summed up and given back to the whole group along with a new set of questions.

Quantitative Methods: Regression Analysis It is a method of fitting an equation to a

Quantitative Methods: Regression Analysis It is a method of fitting an equation to a data set. Simple regression involves one independent variable and one dependent variable. Least squares is the most common method of regression.

Quantitative Methods : Moving Average • An arithmetic average of of the most recent

Quantitative Methods : Moving Average • An arithmetic average of of the most recent observations. • As each new observation is added, the old observation is discarded. • The value of n (the number of periods used to calculate average) reflects responsiveness versus firmness.

Moving Average Method

Moving Average Method

Weighted Moving Average • Simple moving average gives equal weight to each component, a

Weighted Moving Average • Simple moving average gives equal weight to each component, a weighted moving average allows any weights to be placed on each element, provided, the sum of all weights is equal to one

Exponential Smoothing. • A forecasting techniques in which past observations are geometrically discounted according

Exponential Smoothing. • A forecasting techniques in which past observations are geometrically discounted according to their age. The heaviest weight is assigned to the most recent data. • The techniques makes use of a smoothing constant to apply the difference between the most recent forecast and the critical sales data. F t = αA t– 1 + ( 1 - α) F where Ft A F = New forecast. t - 1 = Latest demand. = Previous forecast. α = Smoothing factor. (0 ≤ α ≤ 1) t- 1

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