3-1 Forecasting

McGraw-Hill/Irwin

FORECAST:

FORECAST: A statement about the future value of a variable of

interest such as resource requirements, capacity planning, Supply Chain Management (SCM) and product or service demand.

Forecasts affect decisions and activities throughout an organization Accounting, finance Human resources Marketing MIS Operations Product / service design

3-2 Forecasting

IntroductionIntroduction

1. Forecasting in business forms the basis for budgeting and planning for capacity, sales, inventory, manpower, purchasing and more.

3-3 Forecasting

Applications of forecastingApplications of forecasting

Plan or design the system. Planning to make use of the system.

3-4 Forecasting

IntroductionIntroduction

Planning the use of the system relates to short range and intermediate range planning which means planning inventory workforce resources, planning of purchasing and production activities, budgeting and scheduling etc.

3-5 Forecasting

IntroductionIntroduction

Business Forecasting is more than Predicting demand. Forecasting is also used to predict profits, revenues, costs, productivity changes.

Movements of key economic indicators ( GNP, inflation and government loans) and prices of stocks and bonds.

3-6 Forecasting

FORECAST: A statement about the future value of a variable of

interest such as resource requirements, capacity planning, SCM and product or service demand.

Forecasts affect decisions and activities throughout an organization Accounting, finance Human resources Marketing MIS Operations Product / service design

FORECAST:

3-7 Forecasting

Accounting Cost/profit estimates

Finance Cash flow and funding

Human Resources Hiring/recruiting/training

Marketing Pricing, promotion, strategy

MIS IT/IS systems, services

Operations Schedules, MRP, workloads

Product/service design New products and services

Applications of ForecastsApplications of Forecasts

3-8 ForecastingWeb-Based Forecasting: CPFR Web-Based Forecasting: CPFR DeDefinedfined

Collaborative Planning, Forecasting, and Replenishment (CPFR) a Web-based tool used to coordinate demand forecasting, production and purchase planning, and inventory replenishment between supply chain trading partners.

3-9 Forecasting

Web-Based Forecasting: Web-Based Forecasting: Steps in CPFRSteps in CPFR

1. Creation of a front-end partnership agreement

2. Joint business planning

3. Development of demand forecasts

4. Sharing forecasts

5. Inventory replenishment

3-10 Forecasting

1. Assumes causal system( That same system that existed in the past will exist in future.

2. Forecasts rarely perfect because of RANDOMNESS (having no specific pattern). Allowances should be made for inaccuracies.

4 Each Common characteristics of all forecasts

3-11 Forecasting

3. Forecasts more accurate forgroups vs. individuals naturally because forecasting errors in a group tend to cancel out forecasting errors for individuals.

4. Forecast accuracy decreases as time horizon increases indicating it is safe to make short range forecasts instead of long term forecasts. If you can recall we had talked about Flexible and Agile Corporations in the past.

4 Each Common characteristics of all forecasts