FORECASTING-IN-OPERATION-MANAGEMENT.pdf

FORECASTING OPERATION MANAGEMENT PRESENTED BY GROUP-3 Chua, Cuartero, Del Rosario, Garrido, Llagas, Marcelino, Orbe CONTENTS Elements of a good forecast Steps in forecasting Forecasting and Demand Planning  elements of a good forecast 1. The Forecas...

FORECASTING OPERATION MANAGEMENT PRESENTED BY GROUP-3 Chua, Cuartero, Del Rosario, Garrido, Llagas, Marcelino, Orbe CONTENTS Elements of a good forecast Steps in forecasting Forecasting and Demand Planning  elements of a good forecast 1. The Forecast should be timely 2. The Forecast should be accurate Forecasting requires sufficient time to adjust Accurate and thorough forecasting is capacity and equipment, ensuring capacity crucial for users to plan for potential expansion and production adjustments to errors and compare alternative meet forecasts, ensuring necessary changes forecasts effectively. are covered in the forecasting process. 3. The Forecast should be reliable A forecast system must consistently produce accurate results to avoid issues and maintain user confidence, as even occasional errors can negatively impact overall forecasting and projections.  elements of a good forecast 4. The Forecast should 5. The Forecast should be in the be in writing correct units the Forecast should be The Forecast should be presented in the documented in writing to units that best serve its purpose. this ensure clarity and ensures the information is relevant and consistecy. This written useful. record allows for objective evaluation against actual The Forecast should be simple to results and helps align all 6. understand and use parties with the same information. the Forecast should be both comprehensive and straightforward, ensuring clarity and apply the information without confusion.  Steps in Forecasting 1. Setting the Objective An organization needs to clearly state the purpose of forecasting before initiating it. Setting objective of forecasting involves the following: a. Deciding the time period of forecasting whether an organization should opt for short-term forecasting or long-term forecasting. b. Deciding whether to forecast the overall demand for a product in the market or only for the organizations own products. c. Deciding whether to forecast the demand for the whole market or for the segment of the market. d. Deciding whether to forecast the market share of the organization. 2. Determining Time Period Demand can be forecasted for a long period or short period. In the short run, determinants of demand may not change significantly or may remain constant, whereas in the long run, there is a significant change in the determinants of demand. 3. Selecting a Method for Forecasting Constitutes one of the most important steps of the forecasting process, It can be forecasted by using various methods. The methods of forecasting differs from organization to organization depending on the purpose of forecasting, time frame, and data requirement and its availability. Selecting the suitable method is necessary for saving time and cost and ensuring the reliability of the data. 4. Collecting data Requires gathering primary or secondary data. Primary data refers to the data that is collected by researchers through observation, interviews, and questionnaires for a particular research. On the other hand, secondary data refers to the data that is collected in the past, but can be utilized in the present scenario/research work. 5. Estimating Results Involves making an estimate of the forecasted for predetermined years. The results should be easily interpreted and presented in a usable form. The results should be easy to understand by the readers or management of the organization.  Forecasting Methods and Demand Planning What is Forecasting? A systematic process of predicting future outcomes based on a variety of estimation methodologies and historical data. It helps businesses anticipate demand, resource needs, and production levels, facilitating effective planning and decision-making. Qualitative Methods - Subjective take Quantitative Methods- Resulted by scientific statistics and equation formula Sales Force Option- Used commonly by companies for short-term forecasting of sales User Expectation Method & Survey Buyer Intentions Method- The product demand must accordingly be ascertained under the forecasting list Importance A crucial part of operations management is that it informs about the anticipated customer requirements regarding quantity and timing. Along with serving as a guide for planning in production, scheduling resources, and controlling the inventory, thus ensuring proper operational efficiency. The forecasts must be accurate and factually correct throughout the value chain, since it utilized by all functional areas within the organization, including accounting, finance, marketing, and distribution in making a decision. Basic Concepts in Forecasting Planning Horizon- The length of time on which the forecast is based. It can span from short-range to long-range between 3 months or up to 1 or 10 years Time Series- Utilize historical past data assuming it will be just like in the future, and also help in adjusting production schedules based on anticipated seasonal demand fluctuations Seasonal Patterns - Repeatable periods of ups and downs over the short periods. Cyclical Patterns- A data in the series that takes place over long periods. Random Variation- An unexplained deviation of time from the predictable pattern, such as a trend thus the forecasts are never 100 percent correct. Irregular Variation- A one-time that is explainable, like a disaster which causes the high demand and surge of food, water as well as other necessary stuff.  Types of Forecasting Approaches Statistical: Based on the assumption that the future will be an extrapolation of the past (meaning the existing trends will continue or a current method will remain applicable), Delphi Technique: An interactive forecasting technique that relies on expert panels Judgemental: the subjective expertise of the people responsible for making the forecasts. Exponential Smoothing: Improve the accuracy by weighting recent data more, allowing forecasts to adapt to trends in demand effectively Associative Models: use explanatory variables to predict Sales Field Opinions: Gathered by frontline sales personnel interacting with customers, they provide valuable insights into anticipated demand for specific products. Leadership Opinions: insights from various executives and department heads that can provide a well-rounded perspective on future demand  Components of Demand Planning: Demand Forecasting: Estimating the future demand for products or services based on various factors, including past sales data and market conditions. Inventory Management: Managing stock levels to prevent shortages or surpluses. This includes setting reorder points and safety stock levels. Production Planning: Aligning production schedules with forecasted demand to optimize resource use and minimize costs.  Techniques in Demand Planning: CPFR (Collaborative Planning, Forecasting, and Replenishment): A collaborative approach between suppliers and retailers to improve forecast accuracy and inventory management. It involves sharing sales data and forecasts to align supply with demand. S&OP (Sales and Operations Planning): A process that integrates sales forecasts with production planning to ensure alignment between demand and supply. S&OP helps balance supply chain efficiency with customer satisfaction. The Need of Demand Forecasting Production Planning - The rate which the products must be be matched with the demand that can fluctuate over the period of time in future Financial Planning - A driving force that budget the sales and provide the timing of cash inflows, and cash outflow for purchasing materials,, payment and other expenses in power and utilities. Types of Forecasts Technological: Concerned with the rates of tech-progress Economic: Expectation of future business conditions. Demand: The demand for a company’s products or service throught periods of time Demand Planning Practices Utilizing AI technologies to analyze data continuously in the market conditions to adjust correspondingly, can enhance and foster collaboration among departments to integrate insights from sales to marketing, and operations, which improves the accuracy of forecasts. Forecasting in Practice Statistical alone cannot account for such factors as sales promotions , competitive strategies and unusual disturbances either natural disaters or labor complications. Developing a forecast, is important to understand the purpose of time horizon and level of aggregation, as it has different levels of technical mathematical principles and assumptions. Applications of Forecasting Forecasting plays a vital role in various operational areas, such as production planning, workforce scheduling, and material requirement planning. These applications help minimize costs, avoid stockouts, and maintain adequate service levels, which are essential for success. Challenges in Forecasting and Demand Planning Involve data inaccuracies, limited historical data for new products, and the complexities of current supply chains. Despite its significance, it is inherently prone to errors due to unpredictable nature of markets and external factors. THus it required to constantly update their forecasting models to accommodate new data and changing conditions When doing poor forecasting This can result to poor inventory and staffing decisions, resulting in shortages, terrible service, and customer complaints The Problem The forecasting system is driven by different sectors of the department by their needs and incentives. reference: Seanna. (2014, July 11). PPT - FORECASTING AND DEMAND PLANNING PowerPoint Presentation, free download - ID:1625723. SlideServe. https://www.slideserve.com/seanna/forecasting-and-demand- planning Tiwari, S. (2016, April 30). Demand Forecasting - Operations Management [Slide show]. SlideShare. https://www.slideshare.net/slideshow/demand-forecasting-operations-management/61536837#4 Trivedi, P. (2023b, May 30). Demand forecasting Operations management [Slide show]. SlideShare. https://www.slideshare.net/slideshow/demand-forecasting-operations-management- 258127937/258127937 Five Elements of a Good Forecasting System. (2016, June 1). Shelving Inc. https://www.shelving.com/blogs/blog/five-elements-of-a-good-forecasting-system Chapter 4 Forecasting Tourism Demand (Tourism Planning and Development). (2021, November 13). [Slide show]. SlideShare. https://www.slideshare.net/slideshow/chapter-4-forecasting-tourism-demand- tourism-planning-and-development/250645373 Thank You