Supply Chain : Logistics

Week 3
Forecasting Logistics Requirement
 Introduction
• Forecasting is an attempt to determine in advance
the most likely outcome of an uncertain variable.
• Planning and controlling logistics systems need
predictions for the level of future economic
activities because of the time lag in matching
supply to demand.
• Logistics requirements to be predicted include
customer demand, raw material prices, labour
costs and lead times
 Period Time Forecast
Demand forecasts are organized by periods of time
into three general categories.
• Long-term forecasts.
– span a time horizon from one to five years.
– Predictions for longer periods are very unreliable, since
political and technological issues come into play,
– used for deciding whether a new item should be put
on the market, or whether an old one should be
withdrawn
 Period Time Forecast
• Medium-term forecasts.
– forecasts extend over a period from a few
months to one year.
– used for tactical logistical decisions, such as
setting annual production and distribution plans,
inventory management and slot allocation in
warehouses.
 Period Time Forecast
• Short-term forecasts.
– cover a time interval from a few days to several
weeks.
– forecasts for a shorter time interval (a few hours
or a single day) are quite uncommon.
– Short-term forecasts are as a rule more accurate
than those for medium and long time periods.
 Demand Forecasting
Method
Forecasting approaches can be classified in two main
categories:
• Qualitative Method.
– mainly based on workforce experience or on surveys,
– usually employed for long- and medium-term
forecasts,when there is insufficient history to use a
quantitative approach.
– The most widely used qualitative methods are sales
force assessment, market research and the Delphi
method.
 Demand Forecasting
Method
• Quantitative methods.
– can be used every time there is sufficient demand
history.
– Such techniques belong to two main groups:
• causal methods
based on the hypothesis that future demand depends on the
past or current values of some variables
• time series extrapolation.
some features of the past demand time pattern will remain
the same. The demand pattern is then projected in the future.
 Causal Method
• exploit the strong correlation between the future
demand of some items (or services) and the past
(or current) values of some causal variables.
• For example,
– the demand for economy cars depends on the level of
economic activity and, therefore, can be related to the
GDP.
– the demand for spare parts can be associated with the
number of installed devices using them
 Time Series Extrapolation
Method
• assume that the main features of past
demand pattern will be replicated in the
future.
• A forecast is then obtained by extrapolating
(projecting) the demand pattern.
• Such techniques are suitable for short- and
medium term predictions, where the
probability of a changeovers is low.
 Elementary Technique
• The forecast for the first time period ahead is simply given
by
 
𝑝𝑇 +1=𝑑 𝑇
• Example
Sarath is a Malaysia-based distributor of Korean appliances.
The sales volume of portable TV sets during the last 12
weeks in Kuala Lumpur
The demand pattern is depicted in Figure below. It can be
seen that the trend is constant. By using the elementary
technique, we obtain
 
= 1177
Perioda Perioda
Kuantitas Kuantitas
Waktu Waktu

1 1180 7 1162

2 1176 8 1163

3 1185 9 1180

4 1163 10 1170

5 1188 11 1161

6 1172 12 1177
 Moving Average method
• The moving average method uses the average of
the r most recent demand entries as the forecast
for first period ahead (r ≥ 1):
𝑟 −1
 
𝑑𝑇 − 𝑘
𝑝𝑇 +1=∑
𝑘 =0 𝑟
• If r is chosen equal to 1, the moving average
method reduces to the elementary technique.
 Exponential Smoothing
Method
• The exponential smoothing method (also known as the
Brown method).
• as an evolution over the moving average technique.
• The demand forecast is obtained by taking into account all
historical data and assigning lower weights to older data.
• The demand forecast for the first period ahead is given by

  𝑝𝑇 +1=𝛼 𝑑 𝑇 + ( 1 −𝛼 ) 𝑝𝑇
Thank You