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1

Introduction To Forecasting

for the Littlefield Simulation

BUAD 311: Operations anagement

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!

Forecasting O"#ecti$es

% Introduce the "asic concepts of forecastingand its importance &ithin an organi'ation(

% Identif) se$eral of the more commonforecasting methods

% easure and assess the errors that e*ist in allforecasts

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3

anagerial Issues

% +ecogni'ing the increased importance of

forecasting in "oth manufacturing and

ser$ices(

% ,o& to go a"out implementing forecasting

at all le$els in the organi'ation(

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-

T)pes of Forecasting

% .ualitati$e Techni/ues0on2/uantitati$e forecasting techni/ues "ased on e*pert

opinions and intuition( T)picall) used &hen there are nodata a$aila"le(

% Time Series Anal)sis0 Anal)'ing data ") time periods to determine if trends or

patterns occur(

% ausal +elationship Forecasting0 +elating demand to an underl)ing factor other than time(

4+egression5

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6

ausal +elationship

% ultiple +egression odels

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Simple Linear Regression Model

7t8 a 9 "*

1 ! 3 - 6 * 4Time5

7The simple linear regression

model seeks to fit a linethrough various data over

time

The simple linear regression

model seeks to fit a line

through various data over

time

Is the linear regression model

Is the linear regression model

a

Ytis the regressed forecast value or dependent

variable in the model, a is the intercept value of the theregression line, and b is similar to the slope of the

regression line. However, since it is calculated with thevariabilit of the data in mind, its formulation is not asstraight forward as our usual notion of slope.

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Simple Linear Regression !ormulas for

"alculating#a$ and #b$

a 8 ) 2 "*

" 8 *) 2 n4)54*5

* 2 n 4 *

! !

5

a 8 ) 2 "*

" 8 *) 2 n4)54*5

* 2 n 4 *

! !

5

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Simple Linear Regression %roblem &ata

Week Sales1 150

2 157

3 162

4 166

5 177

'uestion( )iven the data below, what is the simple linear

regression model that can be used to predict sales in future

weeks*

'uestion( )iven the data below, what is the simple linearregression model that can be used to predict sales in future

weeks*

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Week Week*Week Sales Week*Sales

1 1 150 150

2 4 157 314

3 9 162 486

4 16 166 664

5 25 177 885

3 55 162.4 2499

Average Sum Average Sum

" 8 *) 2 n4 )54*5

* 2 n4*8 !-;; 2 641

a 8 ) 2 "* 8 1

! !

=5 4 566 6 ;

! ! =

5 4 566 6 ;

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7t8 1-3(6 9