Candidate for Master in Information Systems
Quantitative Methods – MAT 540
June 21, 2009
Forecasting methods are techniques used by manager of many different occupations. They use them to try and predict the outcome of the future. Managers are forced to make very important decisions that will greatly impact the success of their business. Some managers may form their decision based on previous sales or their own past experiences. Forecasting is a more reliable way for the managers to make their decisions, even though no method can provide a totally accurate prediction. There are a number of different mathematical methods that managers can use. Three of the traditional forecasting methods are time series analysis, regression, and qualitative methods. (Taylor, 2007) The time series analysis is a category of statistical techniques that uses historical data to predict future behavior. This method assumes that what happened in the past will happen again in the future. So the only factor that this method relates to is time. The time series methods are very useful for short- and medium-range forecasting, but can also be used to long-range forecasting. Time series techniques relate a single variable being forecast to time, in contrast regression methods attempt to develop a mathematical relationship between the item being forecast and factors that cause it to behave the way it does. Qualitative methods use management judgment, expertise, and options to make forecasts. They are generally easy to understand, simple to use, and not very costly. (Taylor, 2007) For solving the University Bookstore’s problem of knowing how many computers to stock I used the mean absolute deviation method. MAD is the average, absolute difference between the forecast and the demand. It is also one of the most popular and simplest-to-use ways of measuring forecast error. That was one reason that I chose this method, I also chose it...