OM 300 Final Exam Study Guide
OM 300 Final Exam Study Guide
Chapter 4: Forecasting
Forecasting Steps- 1. Determine the use of the forecast. 2. Select the items to be forecasted. 3. Determine the time horizon of the forecast. 4. Select the forecasting models. 5. Gather the data. 6. Make the forecast. 7. Validate and implement results.
Forecasting Methods
1. Qualitative Method- Used when a situation is vague and little data exist. Used for new products and new technology.
Involves intuition, experience. E.G., forecasting sales on Internet.
a. Jury of executive opinion: Pool opinions of high-level experts, sometimes augmented by statistical models.
b. Delphi Method: Panel of experts, queried iteratively (questions you keep doing)
c. Sales force composite: Estimates from individual salespersons are reviewed for reasonableness, then aggregated.
d. Consumer Market Survey: Ask the customer.
2. Quantitative Method- Used when situation is “stable” and historical data exists. Used for existing products and current technology.
Involves mathematical techniques. E.G., forecasting sales of color televisions.
Naïve approach, moving averages, exponential smoothing, trend projection, linear regression.
Time Series Forecasting- Set of evenly spaced numerical data. Obtained by observing response variable at regular time periods. Forecast based only on past values, no other variables important. Assumes that factors influencing past and present will continue influence in future.
Trend Component- Persistent, overall upward or downward pattern. Changes due to population, technology, age, culture, etc. Typically several years duration.
Seasonal Component- Regular pattern of up and down fluctuations. Due to weather, customs, etc. Occurs within a single unit (length).
Cyclical Component- Repeating up and down movements. Affected by business cycle, political, and economic factors. Multiple years duration. Often casual or associative relationships.
Naïve
Chapter 4: Forecasting
Forecasting Steps- 1. Determine the use of the forecast. 2. Select the items to be forecasted. 3. Determine the time horizon of the forecast. 4. Select the forecasting models. 5. Gather the data. 6. Make the forecast. 7. Validate and implement results.
Forecasting Methods
1. Qualitative Method- Used when a situation is vague and little data exist. Used for new products and new technology.
Involves intuition, experience. E.G., forecasting sales on Internet.
a. Jury of executive opinion: Pool opinions of high-level experts, sometimes augmented by statistical models.
b. Delphi Method: Panel of experts, queried iteratively (questions you keep doing)
c. Sales force composite: Estimates from individual salespersons are reviewed for reasonableness, then aggregated.
d. Consumer Market Survey: Ask the customer.
2. Quantitative Method- Used when situation is “stable” and historical data exists. Used for existing products and current technology.
Involves mathematical techniques. E.G., forecasting sales of color televisions.
Naïve approach, moving averages, exponential smoothing, trend projection, linear regression.
Time Series Forecasting- Set of evenly spaced numerical data. Obtained by observing response variable at regular time periods. Forecast based only on past values, no other variables important. Assumes that factors influencing past and present will continue influence in future.
Trend Component- Persistent, overall upward or downward pattern. Changes due to population, technology, age, culture, etc. Typically several years duration.
Seasonal Component- Regular pattern of up and down fluctuations. Due to weather, customs, etc. Occurs within a single unit (length).
Cyclical Component- Repeating up and down movements. Affected by business cycle, political, and economic factors. Multiple years duration. Often casual or associative relationships.
Naïve