Flashcards
Supply Chain Forecasting Quiz #5
Cards in this deck (31)
- 1Forecasting is a...vital function and impacts every significant management decision
- 2Finance and accounting use forecasts asthe basis for budgeting and cost control
- 3Marketing relies on forecasts tomake key decisions such as new product planning and personnel compensation
- 4Production uses forecasts toselect suppliers, determine capacity requirements, and to drive decisions about purchasing, staffing, and inventory
- 5Different activities require different forecasting approachesDecisions about overall directions require strategic forecasts
Tactical forecasts are used to guide day-to-day decisions - 6Decoupling Points occur wheninventory is positioned in the supply chain to allow one operation to act independently of another
- 7Forecasts of demand at these decoupling points allows inventory to beset to the proper level
- 8Laws of forecasting (1)Almost always WRONG by some amount
- 9Laws of Forecasting (2)More accurate for SHORTER time periods
- 10Laws of forecasting (3)More accurate for GROUPS OR FAMILIES
- 11Laws of forecasting (4)No substitute for CALCULATED VALUES
- 12Laws of forecasting (5)Farther UP SC the more distorted the forecast data (Bullwhip Effect)
- 13Types of Forecasting Four basic types of forecasts are common1. Qualitative
2. Time series analysis (primary focus of this chapter) - Regression can be used
3. Causal relationships - Regression can be used
4. Simulation - 14Time series analysis is based onthe idea that data relating to past demand can be used to predict future demand
- 15Qualitative Forecasting TechniquesGenerally used to take advantage of expert knowledge
Useful when judgment is required, when products are new, or if the firm has little experience in a new market
Examples:
Market research
Panel consensus
Historical analogy
Delphi method - 16Time Series AnalysisUsing the past to predict the future
- 17Time Series Analysis - Short TermForecasting less than three months
Used mainly for tactical decisions (e.g. replenishing inventory) - 18Time Series Analysis - Medium TermForecasting three months to two years
Used to develop a strategy which will be implemented over the next six to eighteen months (e.g. meeting demand) - 19Time Series Analysis - Long TermForecasting greater than two years
Useful for detecting general trends and identifying major turning points - 20Causal Relationship Forecastinguses independent variables (OTHER THAN TIME) to predict future demand
- This independent variable must be a leading indicator
- Many apparently causal relationships are actually just correlated events – care must be taken when selecting causal variables - 21Simulation ModelsAllow the forecaster to run through a range of assumptions about the condition of the forecast.
- 22Components of Demand
- 23Components of Demand
- 24Model Selection: Choosing an appropriate forecasting model depends upon- Time horizon to be forecast
- Data availability
- Accuracy required
- Size of forecasting budget
- Availability of qualified personnel - 25Model Selection: Other factors may also be considered- Degree of flexibility (can the firm react quickly if the forecast is inaccurate?)
- Consequence of a bad forecast (important or costly decisions require a good forecast) - 26Last Period (Naïve Method)Demand for the current period is used as a forecast for the next period.
Ft+1 = At
(where Ft+1= forecast for the next period,
t+1 and At = demand for the current period, t)
SIMPLEST METHOD OF FORECASTING - 27Simple Moving AverageForecast is the average of a fixed number of past periods
Useful when demand is not growing or declining rapidly and no seasonality is present
Removes some of the random fluctuation from the data
Selecting the period length is important
Longer periods provide more smoothing
Shorter periods react to trends more quickly - 28Weighted Moving AverageThe simple moving average formula implies all periods are equally important
A weighted moving average allows unequal weighting of prior time periods
The sum of the weights must be equal to one
Often more recent periods are given higher weights than periods farther in the past - 29Exponential SmoothingA weighted average method which includes all past data in the forecasting calculation
More recent results are weighted more heavily
The most used of all forecasting techniques
An integral part of computerized forecasting - 30Exponential Smoothing: Well accepted for six reasonsExponential models are surprisingly accurate
Formulating an exponential model is relatively easy
The user can understand how the model works
Little computation is required to use the model
Computer storage requirements are small
Tests for accuracy are easy to compute - 31Linear Regression AnalysisRegression is used to identify the functional relationship between two or more correlated variables, usually from observed data
One variable (the dependent variable) is predicted for given values of the other variable (the independent variable)
Linear regression is a special case which assumes the relationship between the variables can be explained with a straight line
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- Supply Chain Flashcards on Supply Chain Forecasting Quiz #5, created by Anna Zuefle on 15/10/2018.
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- Anna Zuefle
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