SUPPLEMENT CHAPTER

FORECASTING
 Forecast
- a statement about the future value of
a variable of interest such as demand.
- predictions about the future
 One key step in forecasting – is to
know the possible option and the lead
times required to bring them about
Casual Modelling is an approach
which describes and evaluates
the complex cost effect
relationships between the key
variables.
 2 APPROACHES TO
FORECASTING

Qualitative methods
- involves collecting and appraising
judgements, options, even best guesses
from experts to make a prediction as
well as past performance.
3 ways that can be done in a
qualitative method:

1. Panel Approach
2. Delphi Method
3. Scenario Planning
 QUANTITATIVE METHODS
Time series examine the patterns of
past behaviour of a single
phenomenon over time, taking into
account reasons for variation in the
trend in order to use the analysis to
forecast the phenomenon’s future
bahaviour.
Forecasting Unassignable Variations

Moving-average forecasting takes the

previous n periods’ actual demand
figures, calculates the average
demand over the n periods, and uses
these average as a forecast for the
next periods’ demands.
Exponential Smoothing - forecasts the
demand in the next period by taking
into account the actual demand in the
current period and the forecasts
which was previously made for the
current period
Forecasting models are widely used
in management decision making, and
indeed most decisions require a
forecast of some kind, yet the
performance of the type of model is
far from impressive.
 Long-term forecasting methods,
although difficult to judge because
of the time lapse between forecast
and the event, do seem to be more
amenable to an objective causal
approach.