Forecasting

ACTIVIDAD 1

ACTIVIDAD 2

FIN DE LA ACTIVIDAD 2

ACTIVIDAD 3

ACTIVIDAD 4

FIN DE ACTIVIDAD

ACTIVIDAD 5

FIN DE LA ACTIVIDAD

ACTIVIDAD 6

FIN DE LA ACTIVIDAD

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todos los derechos 2012.

Index
Warm-up Activity.........
.?
Introduction...................
..........?
Forecasting Time Horizons..
?
The Influence of Product Life Cycle..
.?
Types of Forecasts..
........?
The Importance of Forecasting...
.?

Examples of Forecasting...
........?
Referen
............?

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Reservados todos los derechos 2012.

Warm-up Activity

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Introduction
Forecasting is the art and science of
predicting future events. Forecasting can
involve historical data and their projection
into the future with some sort of
mathematical model (See Figure 1 ). It can
be a subjective or intuitive prediction.
Forecasting can work in one place but not
in another one. Forecasting requires
money and time to prepare and monitor.
Effective planning in both the short and
long run depends on a forecast of demand
for the companys products.

Figure 1 . Forecasting Diagrams Samples.

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2012.

Forecasting Time Horizons

Life Cycle

The Influence of Product

Short-range forecast. This forecast

has a time span of up to 1 year but is
generally less than three months. It is
used for planning purchasing, job scheduling,
workforce
levels,
job
assignments, and produc-tion levels.

Decline

Maturity

Growth

Introduction

Development

Forecasting covers the future time

horizons. Time horizons are divided into
three categories:

Sales Volume

To develop a sales forecast, especially

with a long life, it is necessary to
consider product life cycle (See Figure 2
). Products and services are not sold at
a constant level through their lives.
Most of the products pass through four
stages: (1) introduction, (2) growth, (3)
maturity, and (4) decline.

Time

Figure 2. Standard life cycle of a

product.
Medium-range forecast. A medium-range or inAs an example, virtual
reality devices such as LCD TVs
termediate forecast generally spans need longer forecasts than those in the
from 3 months to 3 years. It is useful in maturity and decline stages, such as
sales planning, production plan-ning video recorders or 3 floppy disks.
and budgeting, cash budgeting, and Forecasts that reflect life cycle are
useful in projecting different staffing
analysis of various operating plans.
levels, inventory levels, and factory
capacity to be produced.
Long-range forecast. Generally covers
3 years or more time span. Long-range
forecasts are used in planning for new
products, capital expenditures, faci-lity
location or expansion, and research
and develop-ment

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Types of Forecasts
Forecasting

The Importance of
Forecast estimates the demand until
the real demand becomes known. It
permits to lead decisions in many
areas. These are some examples of
its application:

Human
Resources. Hiring,
training,
and
laying off workers
all
depend
on
anticipated
demand. If the
human resources
Organizations use three types of
department needs
forecasts in planning future
to hire additional
operations:
workers without warning, the amount
of training declines and the quality of
the workforce suffers.
Capacity.
When
Economic forecasts. They address the
capacity
is
business cycle by predicting inflation
inadequate,
the
rates, money supplies, housing parts,
resulting shortages
and other planning indicators.
can
be
undependable
Technological forecasts. These are
delivery, loss of
related to rates of technological
customers,
and
progress. They can be the result of the
loss
of
market
birth of exciting new products, requiring
share.
new plants and equipment.

Demand forecasts. They are projections

of demand for a companys products or
services. These are sales forecasts that
drive a companys production, capacity,
and scheduling systems and serve as
inputs to financial, marketing, and
personnel planning.

Supply
Chain
Management. The good
supplier
relations
and
good price advantages for
materials
and
parts
depend
on
accurate
forecasts.
They
can
guarantee
sufficient

capacity of making products, selling parts or

transporting materials.

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employs judgmental and nonquantitative models.

Examples of Forecasting
Example 1:
Disney World,
Seven
Steps in
the
Forecasting System

This example of forecasting follows

seven basic steps. This is the Global
Company Profile of Disney World:
1. Determine the use of the
forecast. Disney uses park
attendance forecasts to drive
staffing, opening times, ride
availability, and food supplies.
2. Select
the
items
to
be
forecasted. For Disney World,
there are six main parks. A
forecast of daily attendance at
each is the main number that
determines
labor,
maintenance, and scheduling.
3. Determine the time horizon of
the forecast. Is it short,
medium, or long term? Disney
develops
daily,
weekly,
monthly, annual, and 5-year
forecasts.
4. Select the forecasting models.
Disney uses a variety of
statistical models that permit
to discuss, including moving
averages, econometrics, and
regression analysis. It also

5. Gather the data needed to

make the forecast. Disneys
forecasting team employs 35
analysts and 70 field personnel
to
survey
1
million
people/business every year. It
also uses a firm called Global
Insights for travel industry
forecasts and gathers data on
exchange rates, arrivals into
the U.S., Wall Street trends,
and
school
vacations
schedules.
6. Make the forecast. Based on
the previous steps, Disney
follows
the
forecasting
procedure.
7. Validate and implement the
results. At Disney, forecasts are
reviewed daily at the highest
levels to make sure that the
model, assumptions, and data

are valid. Error measures are

applied; then the forecasts are used
to schedule personnel down to 15minute intervals.
The use of forecasting permits to
initiate, design and implement a
forecasting system. It needs to
create
and
generate
forecasts
regularly over time, and data needs
to be routinely collected.

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increase on these
months.
At
the
beginning of the
year, the logistics
manager requires
to forecast the
number of boxes to buy for the
following year. From one year to
another the sales of cookies increase
Example 2: Forecasting at
5%. What is the forecast of sales for
Blue Cookies
the next year in 3, 6, 9, 12 months in
this company?
Blue Cookies is a
Colombian
company. It sells
cookies in each
shop
of
the
principal cities. It
has 200 cookie
shops around the
country.
Every
month, it sells an
average
of
20
boxes
at
each
shop. On special
celebrations like in
May,
September
and
December,
boxes
sales

In Figure 3 , we can see the boxes

sales at the present year.
Month

Demand

Month

Demand

January

15

July

20

February

20

August

20

March

20

September

22

April

20

October

20

May

22

November

20

27
25
23
21
19

17
15
13
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Figure 3 . Sales in boxes during

this year.

m
e

According to the chart, we can make

the following statements:

Blue
Cookies
sales
decreasing in January.

are

Blue Cookies is selling from 20

to 22 cookie boxes each
month.
Blue
Cookies
sales
are
increasing in May, September,
and December.
Blue Cookies sales remain
stable in January, February,
March, April, June, July, August,
October, and November.

In Figure 4 , we can see cookie boxes

sales forecast for the next year.
Month

Demand

Month

Demand

January

15

July

21

February

21

August

21

March

15

September

23,1 aprx 23

April

21

October

21

May

23,1 aprx 23 November

21

27
25
23
21
19
17
15
13
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n

aJ

ary

a
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ru
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m
e

Figure 4. Boxes Sales Forecast for

Next Year.
According to the chart, we can make
the following statements:

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 In January March, June and October,

Blue Cookies sales are going to
decrease.
In
February,
April,
May,
July,
September, and December Blue
Cookies sales are going to increase.
In August and November, Blue
Cookies sales are going to remain
stable.

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Picture
References

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