Jo Ann General

Forecasting

Operations Management
Learning Objectives
➢ To evaluate how forecasting affects customers satisfaction.

➢ To apply the different forecasting approaches to ensure product

availability.

➢ To analyze the importance of understanding customer needs and

assess the effect of customer satisfactions.

Operations Management
 What is
Forecasting?

Operations Management
Forecast
Forecasts are basic input in the decision processes of operations
management because they provide information on future demand.

The primary goal of operations management is to match supply

to demand.

Having a forecast of demand is essential for determining how much

capacity or supply will be needed to meet the demand.

For instance, operations need to know what capacity will be needed to

make staffing and equipment decisions, budgets must be prepared,
purchasing needs information for ordering from suppliers, and supply
chain partners need to make their plans.

Operations Management
Forecast (cont.)
Is a statement about the future value of a variable of interest,
such as demand. Or simply, the prediction about the future.

Two important aspects of forecast:

The expected level of demand
The degree or accuracy that can be assigned to a forecast

Forecasts can be Short range (e.g. an hour, day, week, or month),

or Long range (e.g., the next six months, the next year, the next five
years, or the life of a product or service).

Operations Management
Features Common to all Forecasts
1 Assumes that the same underlying casual system that existed in the
past will continue to exist in the future.

2 It's not perfect; actual results differ from predicted values due to
randomness

3 Forecasts is more accurate for groups than individuals

4 Forecast accuracy decreases as time horizon increases

Operations Management
Elements of a Good Forecast

Timely Accurate Reliable Meaningful Written Easy to use

Units

Operations Management
Source: Stevenson, William (2018). Operations Management (13th
ed.). New York, NY USA. McGraw-Hill Education.
Steps in Forecasting
Monitor the forecast

Prepare the forecast

Select a forecasting technique

Gather and analyze data

Establish a time horizon

Determine the purpose of forecast

Operations Management
Source: Stevenson, William (2018). Operations Management (13th
ed.). New York, NY USA. McGraw-Hill Education.
Forecasts Based on Time-Series Data

Trend Seasonality Cycles

long-term upward or short-term fairly regular wavelike variations of more

downward movement in the
data
ex. population shifts, changing
incomes, and cultural changes
variations related to factors
such as calendar or time of day
than one year's duration
often related to a variety of
economic, political, and even
agricultural condition
 OVERLY OPTIMISTIC
FORECASTS CAN BE
BAD NEWS
Overly optimistic forecasts by retail store buyers can
easily lead retailers to overorder, resulting in bloated
inventories.

When that happens, there is pressure on stores to

cut prices in order to move the excess merchandise.
Although customers delight in these markdowns,
retailer profits generally suffer.
 Jo Ann General

Product and
Service
Design
Operations Management
Objectives of Product &Service Design
1 Be competitive by introducing new products.

2 Translate customer wants and needs into a product.

3 Satisfy the customer while making a reasonable profit.

4 Other considerations include:

development time and cost
product or service cost
product or service quality
design for operations

Operations Management
Methods of Generating Ideas
Ideation Techniques
 Brainstorming

Nothing beats the classic form of

ideation, the brainstorming. This is the
process of generating wild ideas in one
session. The ideas will be verbally stated
during the group session.

Operations Management
 Brainwriting

All participants would have to write their ideas

first on a piece of paper. The participant will write
her ideas on a piece of paper before passing it on
to someone else. Then the next person will read
her idea and would add onto it. The process will
continue until all participants have been able to
write their idea on the piece of paper. After
collecting all ideas, that’s the time that the
discussion will start.

Operations Management
 Bodystorming

Refers to ideas that come to your mind

by physically experiencing a situation
resembling your problem using people,
props, or a digital prototype.

Operations Management
 Force Fit

Is simply the process of combining two

ideas into one.

Operations Management
 Poetry

Is the process of combining random

elements to make up one new idea.

Operations Management
 Borrowing

The process of creating a

new product using the same
structure of an existing
product or item, but this
time, he will create it for a
totally different purpose.

Operations Management
 Where can you get
new ideas for
your business?

Operations Management
 Sources of New Ideas

Consumers
Government
Distribution Channels
Research and Development
Existing Products and Services

Operations Management
 SOURCES OF NEW IDEAS

Operations Management
Operations Management
Operations Management
 Factors Influencing Market Opportunities

Economic Change
Sociological and
Demographic change
Technological change
Political Change

Operations Management
 Product Development Process

What's in there?

Operations Management
PRODUCT DEVELOPMENT

Product development is the process of building a

new product, from ideation all the way through
launch.

Product development begins with those initial

brainstorming sessions, when you’re just
discussing a budding idea. From there, the
process is creative but strategic, and you may
have seen it done in a million different ways.
 The 5 Frameworks
1 Idea stage

2 Concept stage

3 Prototyping stage

4 Test marketing stage

5 Commercialization

Operations Management
 Source: Stevenson, William (2018). Operations Management (13th ed.).
New York, NY USA. McGraw-Hill Education.

Constantino, Twinkle (2015). Operations Management Forecasting. Retrieved

from https://www.slideshare.net/Euwinx/operations-management-
forecasting. Retrieved on September 4, 2022.

Raeburn, Alicia (2022). Product development process: The 6 stages. Retrieved

from https://asana.com/resources/product-development-process. Retrieved
on August 20, 2022.