Forecasting Methods

Topics: Forecasting, Time series, Moving average Pages: 18 (2573 words) Published: December 14, 2012
Forecasting Methods
What is forecasting ?
Why is forecasting important ?
How can we evaluate a future demand ?
How do we make mistakes ?

Prod 2100-2110

Forecasting Methods

0

Contents
1. FRAMEWORK OF PLANNING DECISIONS ............................................................................... 2 2. FORECASTING................................................................................................................................. 3 2.1 CHARACTERISTICS ............................................................................................................................... 3 2.2 TYPE OF FORECASTS: .......................................................................................................................... 4 3. TIME SERIES METHODS ............................................................................................................... 5 3.1 EXAMPLES ........................................................................................................................................... 5 3.2 PRINCIPLES .......................................................................................................................................... 7 4 STATIONARY TIME SERIES.......................................................................................................... 8 4.1 MOVING AVERAGE:............................................................................................................................. 8 4.2 WEIGHTED AVERAGE: ......................................................................................................................... 9 4.3 EXP. SMOOTHING: ............................................................................................................................... 9 4.4 COMPARISON BETWEEN MA AND ES ................................................................................................ 10 5 TREND-BASED TIME SERIES ...................................................................................................... 11 5.1 LINEAR REGRESSION ......................................................................................................................... 12 5.2 DOUBLE EXP. SMOOTHING (HOLT).................................................................................................... 13 5.3 COMPARISON ( LIN. REGRESSION - 2ES)........................................................................................... 15 6. SEASONAL TIME SERIES ............................................................................................................ 16 6.1 CMA METHOD .................................................................................................................................. 17 6.2 WINTERS' METHOD ........................................................................................................................... 21 7. EVALUATION OF FORECAST .................................................................................................... 22 8. OTHER METHODS ........................................................................................................................ 23 9. WHICH METHOD TO USE ?........................................................................................................ 23

Makridakis S. and S.C. Wheelwright, Forecasting Methods for Management, John Wiley & Sons, 1989.

Prod 2100-2110

Forecasting Methods

1

1. Framework of planning decisions
Let us first remember where the inventory control decisions may take place.

Corporate
Strategic
Planning
Forecasting

Product and
Financial
Market
⇐ Planning
Planning

Aggregate
Forecasting

Aggregate
Resource
Production ⇐
Planning
Planning

Item
Forecasting

Master
Rough-cut
Production ⇐ Capacity
Scheduling
Planning

Spare
Forecasting

Material
Capacity
Requirement ⇐ Requirement
Planning
Planning

Here are the successive decision steps by which a...