management notes
2. Identify and briefly describe the two general forecasting approaches.
1. Qualitative: forecasts that incorporate such factors as the decision makers intuition, emotions, personal experiences, and value system
2. Quantitative: forecasts that employ mathematical modeling to forecast demand
3. Identify the three forecasting time horizons. State an approximate duration for each.
1. Short-range forecast: Used for planning purchasing, job scheduling, workforce levels, job assignments, and production levels. Time span is up to 1 year, but generally less than 3 months.
2. Medium-range forecast: Used in sales planning, production planning and budgeting, cash budgeting, and analysis of operating plans. Time span is from 3 months to 3 years.
3. Long-range forecast: Used for planning new products, capital expenditures, facility location or expansion, and research development. Time span is generally 3 years or more.
4. Briefly describe the steps that are used to develop a forecasting system. 1. Determine the use of the forecast 2. Select the items to be forecasted 3. Determine the time horizon of the forecast: Is it short, medium, or long term? 4. Select the forecasting model(s): qualitative, non qualitative.
5. Gather the data needed to make the forecast
6. Make the forecast
7. Validate and implement the results
11. Define time series.
A forecasting technique that uses a series of past data points to make a forecast.
12. What effect does the value of the smoothing constant have on the weight given to the recent values?
The smoothing constant is the weighting factor used in an exponential smoothing forecast, a number greater than or equal to 0 and less than or equal to 1. It can be changed to give more weight to recent data or more weight to past data.
1. Qualitative: forecasts that incorporate such factors as the decision makers intuition, emotions, personal experiences, and value system
2. Quantitative: forecasts that employ mathematical modeling to forecast demand
3. Identify the three forecasting time horizons. State an approximate duration for each.
1. Short-range forecast: Used for planning purchasing, job scheduling, workforce levels, job assignments, and production levels. Time span is up to 1 year, but generally less than 3 months.
2. Medium-range forecast: Used in sales planning, production planning and budgeting, cash budgeting, and analysis of operating plans. Time span is from 3 months to 3 years.
3. Long-range forecast: Used for planning new products, capital expenditures, facility location or expansion, and research development. Time span is generally 3 years or more.
4. Briefly describe the steps that are used to develop a forecasting system. 1. Determine the use of the forecast 2. Select the items to be forecasted 3. Determine the time horizon of the forecast: Is it short, medium, or long term? 4. Select the forecasting model(s): qualitative, non qualitative.
5. Gather the data needed to make the forecast
6. Make the forecast
7. Validate and implement the results
11. Define time series.
A forecasting technique that uses a series of past data points to make a forecast.
12. What effect does the value of the smoothing constant have on the weight given to the recent values?
The smoothing constant is the weighting factor used in an exponential smoothing forecast, a number greater than or equal to 0 and less than or equal to 1. It can be changed to give more weight to recent data or more weight to past data.