Production Forecasting
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Questions and Answers

What is a forecast in the context of production?

  • A calculation of the cost of production for a product
  • A decision on the marketing strategy for a product
  • A prediction of the level of demand for a product in the future (correct)
  • A plan for the distribution of a product

    • What is the minimum time period that a forecast should cover?

  • The time period required to put a decision into effect
  • The time period required to make and implement a decision (correct)
  • The time period required to make a decision
  • A year

    • What is one of the major purposes of forecasting?

  • To determine the marketing strategy
  • To determine the production schedule
  • To determine the necessity for plant expansion (correct)
  • To determine the price of a product

    • What makes forecasting for a new product difficult?

    <p>No past information available to predict the future</p> Signup and view all the answers

    What is the purpose of a direct survey method?

    <p>To obtain information from customers to predict future sales</p> Signup and view all the answers

    What is the indirect survey method used for?

    <p>To obtain information from salesmen, agents, wholesalers, retailers, etc.</p> Signup and view all the answers

    What is the purpose of a limited market trial?

    <p>To test the acceptance of a new product</p> Signup and view all the answers

    What is the related information method used for?

    <p>To find an index that directly varies with sales volume</p> Signup and view all the answers

    What is the purpose of forecasting for established products?

    <p>To predict sales based on an index</p> Signup and view all the answers

    Why is forecasting for a new product more difficult than for an established product?

    <p>Because there is no past information available to predict the future</p> Signup and view all the answers

    What is the purpose of market research in forecast demand?

    <p>To analyze the future demands of a product</p> Signup and view all the answers

    What is the sales force composite method of forecasting?

    <p>A method where salespeople express their opinion about future sales</p> Signup and view all the answers

    What is the jury of executive opinion method of forecasting?

    <p>A method that uses expert opinions to predict future sales</p> Signup and view all the answers

    What is the projection method of forecasting?

    <p>A method that uses historical data to project future sales</p> Signup and view all the answers

    What is time series analysis?

    <p>A chronological data with some quantity as the dependent variable and unit of time as the independent variable</p> Signup and view all the answers

    What is a secular trend in time series analysis?

    <p>A long-term change in the data</p> Signup and view all the answers

    What is the method of inspection or freehand method?

    <p>A method of estimating trends by drawing a line through the points on a graph</p> Signup and view all the answers

    What is the moving average method?

    <p>A method of estimating trends by averaging the values of the years</p> Signup and view all the answers

    What is statistical method of forecasting?

    <p>A method of forecasting that uses historical data and statistical analysis</p> Signup and view all the answers

    What is the general approach to statistical forecasting?

    <p>To plot the demand versus time and apply statistical methods</p> Signup and view all the answers

    What is the purpose of evaluating the expected error in the statistical technique?

    <p>To decide whether to use the technique or find a better one</p> Signup and view all the answers

    What is the assumption made in the Level Demand With Random Variation example?

    <p>Demand data studied for the periods are truly representative of the demand</p> Signup and view all the answers

    What is the result of the analysis in the Level Demand With Random Variation example?

    <p>Forecast is that the demand will be 99 units per month</p> Signup and view all the answers

    What is the purpose of using a moving avg.forecaster?

    <p>To eliminate periodic fluctuating time series</p> Signup and view all the answers

    What is an advantage of using a moving avg.forecaster?

    <p>It gives a fair good picture of general long-term movement in data</p> Signup and view all the answers

    What is a disadvantage of using a moving avg.forecaster?

    <p>It tends to cut out corners which results in loss of data at the ends</p> Signup and view all the answers

    What is the purpose of exponential smoothing method?

    <p>To determine the validity of a forecasting method</p> Signup and view all the answers

    What is the purpose of controlling the forecast of Example 1 by Moving Range Chart?

    <p>To take action regarding the demand and its cause system</p> Signup and view all the answers

    What action can be taken regarding the forecaster?

    <p>Revise it including new cause system</p> Signup and view all the answers

    What is an action regarding demand and its cause system?

    <p>Change in advertising</p> Signup and view all the answers

    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:
      1. Plot demand versus time.
      2. Determine which statistical technique to use.
      3. Evaluate the expected error.
      4. 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:
      1. Of three successive points, are two or more in either region A?
      2. Of five successive points, are four or more in either region B?
      3. Are the eight successive points on either side of the center line?

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    Description

    This quiz covers the concept of production forecasting, estimating demand for multiple products over a period of time, and its applications in making decisions.

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