OM 300 Final Exam Study Guide- Petty
Chapter 4: Forecasting
Forecasting Steps
1. Determine the use of the forecast
2. Select the item tot be forecasted
3. Determine the time horizon of the forecast
4. Select the forecasting model(s)
5. Gather the data
6. Make the forecast
7. Validate and implement results
Forecasting Methods
Quantitative Methods: used when situation it “stable” and historical data exists; existing products and current technology are key; involves mathematical techniques; ex: forecasting sales of color televisions
Jury of executive opinion: pools opinions of high level experts sometimes augmented by statistical models; small groups estimate demand by working together by combining managerial experience with statistical models; “groupthink” is a disadvantage
Delphi method: panel of experts, queried iteratively which continues until consensus is reached; Participants include – decision makers, staff, and respondents; continuously moving
Qualitative Methods:
Sales Force Composite: estimates from individual salespersons are reviewed for reasonableness, and aggregated; each salesperson projects their sales and they are combined at district and national levels; sales reps know what customers want but estimates tend to be overly optimistic
Consumer Market Survey: ask the customer about purchasing plans; what customers say and what they actually do are often different and difficult for them to answer
Times Series Models Calculations!
Time Series Components:
Trend (good); changes due to population, technology, age, etc. over several years
Cyclical (goes up and down; not steady); affected by business cycle, political & economical factors; multiple years duration; often causal or associative relationships
Seasonal (steady up and down); weather, customs, holidays, occurs within a single unit; not always actual seasons
Random (things will always be changing); erratic, unsystematic fluctuations; due to random variation or unforeseen events; short duration and non
Forecasting Steps
1. Determine the use of the forecast
2. Select the item tot be forecasted
3. Determine the time horizon of the forecast
4. Select the forecasting model(s)
5. Gather the data
6. Make the forecast
7. Validate and implement results
Forecasting Methods
Quantitative Methods: used when situation it “stable” and historical data exists; existing products and current technology are key; involves mathematical techniques; ex: forecasting sales of color televisions
Jury of executive opinion: pools opinions of high level experts sometimes augmented by statistical models; small groups estimate demand by working together by combining managerial experience with statistical models; “groupthink” is a disadvantage
Delphi method: panel of experts, queried iteratively which continues until consensus is reached; Participants include – decision makers, staff, and respondents; continuously moving
Qualitative Methods:
Sales Force Composite: estimates from individual salespersons are reviewed for reasonableness, and aggregated; each salesperson projects their sales and they are combined at district and national levels; sales reps know what customers want but estimates tend to be overly optimistic
Consumer Market Survey: ask the customer about purchasing plans; what customers say and what they actually do are often different and difficult for them to answer
Times Series Models Calculations!
Time Series Components:
Trend (good); changes due to population, technology, age, etc. over several years
Cyclical (goes up and down; not steady); affected by business cycle, political & economical factors; multiple years duration; often causal or associative relationships
Seasonal (steady up and down); weather, customs, holidays, occurs within a single unit; not always actual seasons
Random (things will always be changing); erratic, unsystematic fluctuations; due to random variation or unforeseen events; short duration and non