1 Forecasting. 2 Introduction Six Forecasting steps: 1. Determine the use of the forecast 2. Select the items or quantities to be forecasted 3. Determine.

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Presentation transcript:

1 Forecasting

2 Introduction Six Forecasting steps: 1. Determine the use of the forecast 2. Select the items or quantities to be forecasted 3. Determine the time horizon of the forecast 4. Select the forecasting model 5. Gather the data needed to make the forecast 6. Make the forecast

3 Moving Averages n Moving average:  demand in previous n periods

4 Calculation of Three-Month Moving Average Month Actual Shed Sales Three-Month Moving Average January 10 February 12 March13 April16 May19 June 23 July 26 ( )/3 = 11 2 / 3 ( )/3 = 13 2 / 3 ( )/3 = 16 ( )/3 = 19 1 / 3

5 Weighted Moving Averages Weighted moving average =

6 Calculating Weighted Moving Averages Weights Applied Period 3 Last month 2 Two months ago 1 Three months ago 3*Sales last month + 2*Sales two months ago + 1*Sales three months ago 6 Sum of weights

7 Calculation of Three-Month Moving Average MonthActual Shed Sales Three-Month Moving Average January February March April May June July26 [3*13+2*12+1*10]/6 = 12 1 / 6 [3*16+2*13+1*12]/6 =14 1 / 3 [3*19+2*16+1*13]/6 = 17 [3*23+2*19+1*16]/6 = 20 1 / 2

8 Trend Projection General regression equation:

9 Using Regression Analysis to Forecast Y Triple A' Sales ($100,000's) X Local Payroll ($100,000,000)

10 Using Regression Analysis to Forecast - continued Sales, YPayroll, XX2X2 XY  Y = 15  X 2 = 80  X = 18  XY = 51.5

11 Using Regression Analysis to Forecast - continued Calculating the required parameters:

12 Correlation Coefficient

13 Correlation Coefficient - Four Values