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Questions and Answers
What is the primary purpose of a production forecast?
What is the primary purpose of a production forecast?
What is the main challenge in forecasting for a new product?
What is the main challenge in forecasting for a new product?
What is the purpose of a direct survey method in forecasting?
What is the purpose of a direct survey method in forecasting?
What is the indirect survey method used for in forecasting?
What is the indirect survey method used for in forecasting?
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What is the purpose of comparing with an established product in forecasting?
What is the purpose of comparing with an established product in forecasting?
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What is the limited market trial method used for in forecasting?
What is the limited market trial method used for in forecasting?
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What is the related information method used for in forecasting?
What is the related information method used for in forecasting?
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What is the primary benefit of production forecasting?
What is the primary benefit of production forecasting?
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What is the primary objective of market research in forecasting future demands?
What is the primary objective of market research in forecasting future demands?
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What is the basis of the sales force composite method of forecasting future demands?
What is the basis of the sales force composite method of forecasting future demands?
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What is the primary limitation of the jury of executive opinion method?
What is the primary limitation of the jury of executive opinion method?
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What is the primary focus of time series analysis in forecasting?
What is the primary focus of time series analysis in forecasting?
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What is the primary advantage of the projection method of forecasting?
What is the primary advantage of the projection method of forecasting?
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What is the term for the long-term movement of a time series, reflecting continuous growth, stagnation, or decline?
What is the term for the long-term movement of a time series, reflecting continuous growth, stagnation, or decline?
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What is the primary method of estimating trends in statistical forecasting?
What is the primary method of estimating trends in statistical forecasting?
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What is the primary consideration when using statistical methods in forecasting?
What is the primary consideration when using statistical methods in forecasting?
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What is the primary approach to statistical forecasting?
What is the primary approach to statistical forecasting?
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What is the primary advantage of statistical methods in forecasting?
What is the primary advantage of statistical methods in forecasting?
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What is the primary objective of evaluating the expected error in a statistical technique?
What is the primary objective of evaluating the expected error in a statistical technique?
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What is the assumption made in the level demand with random variation example?
What is the assumption made in the level demand with random variation example?
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What is the advantage of using a moving average forecaster in certain cases?
What is the advantage of using a moving average forecaster in certain cases?
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What is the disadvantage of using a moving average forecaster when the trend is non-linear?
What is the disadvantage of using a moving average forecaster when the trend is non-linear?
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What is the purpose of controlling the forecast of Ex.1 by Moving Range Chart?
What is the purpose of controlling the forecast of Ex.1 by Moving Range Chart?
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What is the condition for establishing the validity of d1- 99 as a forecaster for Ex.1?
What is the condition for establishing the validity of d1- 99 as a forecaster for Ex.1?
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What is the action that should be taken when an out-of-control condition is observed in the Moving Range Chart?
What is the action that should be taken when an out-of-control condition is observed in the Moving Range Chart?
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What is the characteristic of a stable cause system?
What is the characteristic of a stable cause system?
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What is the advantage of using the Exponential Smoothing Method?
What is the advantage of using the Exponential Smoothing Method?
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What is the purpose of using a control chart in forecasting?
What is the purpose of using a control chart in forecasting?
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Study Notes
Production Forecasting
- Forecasting is an estimate of the level of demand for a product over a certain period of time in the future.
- A forecast should cover a time period at least as long as the period of time required to make a decision and to put that decision into effect.
Purposes of Forecasting
- Determine the necessity for and the size of plant expansion (Facility Forecast).
- Determine intermediate planning for existing products to be manufactured with existing facilities.
- Determine short-time scheduling of existing products to be manufactured on existing equipment (Product Forecast).
Forecasting for a New Product
- Difficult task as no past information is available to predict the future.
- Methods:
- Direct Survey method: approach a representative sample of customers to predict future demand.
- Indirect Survey method: predict customer attitude and behavior through salesmen, agents, wholesalers, retailers, etc.
- Comparing with Established Product: compare sales figures with an existing similar product.
- Limited Market Trial: test the product in a limited market to gauge acceptance.
Forecasting for an Established Product
- Methods:
- Related Information method: find an index that directly varies with sales volume (e.g., birth rate for baby food sales).
- Market Research: analyze marketing forces, socio-economic pressures, and changing patterns to predict future demand.
- Sales Force Composite method: gather opinions from salespeople to estimate future sales.
- Jury of Executive Opinion method: gather opinions from experts on future sales.
- Projection Method: project future sales based on historical data using time series analysis or correlation and regression analysis.
Time Series Analysis
- A time series is a chronological data with a dependent variable (e.g., sales, production figures) and an independent variable (unit of time).
- Components of a time series:
- Long period changes (Trend)
- Short period changes (Seasonal, Cyclic, Irregular)
- Methods of Estimating Trends:
- Methods of Inspection or Freehand methods
- Methods of Averages:
- Selected point method
- Semi-avg.method
- Moving Avg.methods
- Statistical methods
Statistical Methods
- General Approach to Statistical Forecasting:
- Plot demand versus time.
- Determine which statistical technique to use.
- Evaluate the expected error.
- Decide whether to use the technique or find a better one.
Moving Average Forecaster
- A moving average can be used as a forecaster to eliminate periodic fluctuations in a time series.
- Advantages:
- Gives a good picture of general long-term movement in data.
- No personal prejudice or bias.
- Cyclic fluctuations are completely eliminated if the period of moving average is equal to the period of cycles.
- Simple to use without fitting a curve.
- Disadvantages:
- Tendency to cut out corners, resulting in loss of data at the ends.
- No mathematical equation for forecasting.
- Sharp turns in the graph are reduced to small curvatures.
- Care must be taken in selecting data and the period of moving average.
Exponential Smoothing Method
- Used to determine the validity of a forecast by comparing it with new observations.
- Conditions to determine the validity of a forecast:
- Of three successive points, are two or more in either region A?
- Of five successive points, are four or more in either region B?
- Are the eight successive points on either side of the center line?
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Description
Learn about the importance of forecasting in production, including estimating demand and determining plant expansion. Understand the purposes of forecasting and its role in intermediate planning.
