Professional Documents
Culture Documents
PRODUCTION AND
OPERATIONS MANAGEMENT
MGT-303
Week : 4 & 5
Forecasting
The outline of the session
2
What is Forecasting?
Types of Forecasts
The Strategic Importance of Forecasting
Seven Steps in Forecasting System
An Overview of Forecasting Techniques
Qualitative Methods of Forecasting
Quantitative Methods of Forecasting
A Case Study: The Computer Club Warehouse Problem
Applying Time-Series Forecasting to the Case Study
Causal Forecasting with Linear Regression
Judgmental Forecasting Methods
Learning objectives
3
Human Resources
Capacity
Supply-Chain Management
Forecasting System
7
Forecasting
Methods
Quantitative Qualitative
Time-series
Models Associative
Model Personal Assessment
Panel consensus
Delphi method
Last-value Method Sales Force composite
Linear
Moving Averages Regression Market Research
Exponential Smoothing
Trend Projection
Forecasting Methods Currently in Use
9
Qualitative Methods
• Personal Assessment
• Panel Consensus
• Delphi Method
• Sales Force Composite
• Market Research
Forecasting Methods Currently in Use
10
Quantitative Methods
- There are three subcategories:
17 25 24 26 30 28
A B C D E
1 CCW's Average Daily Call Volume
2
3 Year Quarter Call Volume
4 1 1 6,809
5 1 2 6,465
6 1 3 6,569
7 1 4 8,266
8 2 1 7,257
9 2 2 7,064
10 2 3 7,784
11 2 4 8,724
12 3 1 6,992
13 3 2 6,822
14 3 3 7,949
15 3 4 9,650
Applying Time based (time-series)
Forecasting Models to the Case Study
21
A B C D E F G
1 Estimating Seasonal Factors for CCW
2
3 True
4 Year Quarter Value Type of Seasonality
5 1 1 6,809 Quarterly
6 1 2 6,465
7 1 3 6,569
8 1 4 8,266 Estimate for
9 2 1 7,257 Quarter Seasonal Factor
10 2 2 7,064 1 0.9323
11 2 3 7,784 2 0.9010
12 2 4 8,724 3 0.9873
13 3 1 6,992 4 1.1794
14 3 2 6,822
15 3 3 7,949
16 3 4 9,650
Seasonally Adjusted Time Series for
CCW
25
A B C D E F
1 Seasonally Adjusted Time Series for CCW
2
3 Seasonal Actual Seasonally Adjusted
4 Year Quarter Factor Call Volume Call Volume
5 1 1 0.93 6,809 7,322
6 1 2 0.90 6,465 7,183
7 1 3 0.99 6,569 6,635
8 1 4 1.18 8,266 7,005
9 2 1 0.93 7,257 7,803
10 2 2 0.90 7,064 7,849
11 2 3 0.99 7,784 7,863
12 2 4 1.18 8,724 7,393
13 3 1 0.93 6,992 7,518
14 3 2 0.90 6,822 7,580
15 3 3 0.99 7,949 8,029
16 3 4 1.18 9,650 8,178
Outline for Forecasting Call Volume
26
A B C D E F G H I J K
1 Last-Value Forecasting Method with Seasonality for CCW
2
3 Seasonally Seasonally
4 True Adjusted Adjusted Actual Forecasting
5 Year Quarter Value Value Forecast Forecast Error Type of Seasonality
6 1 1 6,809 7,322 Quarterly
7 1 2 6,465 7,183 7,322 6,589 124
8 1 3 6,569 6,635 7,183 7,112 543 Quarter Seasonal Factor
9 1 4 8,266 7,005 6,635 7,830 436 1 0.93
10 2 1 7,257 7,803 7,005 6,515 742 2 0.90
11 2 2 7,064 7,849 7,803 7,023 41 3 0.99
12 2 3 7,784 7,863 7,849 7,770 14 4 1.18
13 2 4 8,724 7,393 7,863 9,278 554
14 3 1 6,992 7,518 7,393 6,876 116
15 3 2 6,822 7,580 7,518 6,766 56
16 3 3 7,949 8,029 7,580 7,504 445
17 3 4 9,650 8,178 8,029 9,475 175
18 4 1 8,178 7,606
19 4 2
20 4 3
21 4 4
22 5 1 Mean Absolute Deviation
23 5 2 MAD = 295
24 5 3
25 5 4 Mean Square Error
26 6 1 MSE = 145,909
Measuring the Forecast Accuracy (error)
for Last-Value Method with Seasonality
29
A B C D E F G H I J K
1 Averaging Forecasting Method with Seasonality for CCW
2
3 Seasonally Seasonally
4 True Adjusted Adjusted Actual Forecasting
5 Year Quarter Value Value Forecast Forecast Error Type of Seasonality
6 1 1 6,809 7,322 Quarterly
7 1 2 6,465 7,183 7,322 6,589 124
8 1 3 6,569 6,635 7,252 7,180 611 Quarter Seasonal Factor
9 1 4 8,266 7,005 7,047 8,315 49 1 0.93
10 2 1 7,257 7,803 7,036 6,544 713 2 0.90
11 2 2 7,064 7,849 7,190 6,471 593 3 0.99
12 2 3 7,784 7,863 7,300 7,227 557 4 1.18
13 2 4 8,724 7,393 7,380 8,708 16
14 3 1 6,992 7,518 7,382 6,865 127
15 3 2 6,822 7,580 7,397 6,657 165
16 3 3 7,949 8,029 7,415 7,341 608
17 3 4 9,650 8,178 7,471 8,816 834
18 4 1 7,530 7,003
19 4 2
20 4 3
21 4 4
22 5 1 Mean Absolute Deviation
23 5 2 MAD = 400
24 5 3
25 5 4 Mean Square Error
26 6 1 MSE = 242,876
The Moving-Average Forecasting
Method
32
The moving-average forecasting method averages the data for only the
most recent time periods.
n = Number of recent periods to consider as relevant for
forecasting
Forecast = Average of last n values