Professional Documents
Culture Documents
Chapter 15
Demand Management
and
Forecasting
OBJECTIVES
• Demand Management
• Qualitative Forecasting
Methods
• Simple & Weighted
Moving Average
Forecasts
• Exponential Smoothing
• Simple Linear Regression
• Web-Based Forecasting
1-3
4
Demand Management
Independent Demand:
Finished Goods
A Dependent Demand:
Raw Materials,
Component parts,
B(4) C(2) Sub-assemblies, etc.
1-4
5
Independent Demand:
What a firm can do to manage it?
1-5
6
Types of Forecasts
• Qualitative (Judgmental)
• Quantitative
– Time Series Analysis
– Causal Relationships
– Simulation
1-6
7
Components of Demand
Seasonal variation
x
x x Linear
x x
x x Trend
x
Sales
x
x x x
x
x
xx
x xx x x
x
x
x x x x x x
x x x x x x
x x x
x xxxxx
x
x x
1 2 3 4
Year
1-8
9
Qualitative Methods
1-9
10
Delphi Method
1-12
13
1000
900
Demand
Demand
800
3-Week
700
6-Week
600
500 Note how the
1 2 3 4 5 6 7 8 9 10 11 12 3-Week is
Week smoother than
the Demand,
and 6-Week is
even smoother
1-15
16
1-16
17
1-17
18
Ft = w 1 A t -1 + w 2 A t - 2 + w 3 A t -3 + ...+ w n A t- n
n
wt = weight given to time period “t”
occurrence (weights must add to one)
w
i=1
i =1
1-18
19
1-19
20
F4 = 0.5(720)+0.3(678)+0.2(650)=693.4
1-20
21
1-21
22
F5 = (0.1)(755)+(0.2)(680)+(0.7)(655)= 672
1-22
23
Week Demand
1 820 Question: Given the
2 775 weekly demand
3 680 data, what are the
4 655 exponential
5 750 smoothing
6 802 forecasts for
7 798 periods 2-10 using
8 689
a=0.10 and a=0.60?
9 775
Assume F1=D1
10
1-24
25
Answer: The respective alphas columns denote the forecast values. Note
that you can only forecast one time period into the future.
900
800 Demand
Demand
700 0.1
600 0.6
500
1 2 3 4 5 6 7 8 9 10
Week
1-26
27
1-27
28
F1=820+(0.5)(820-820)=820 F3=820+(0.5)(775-820)=797.75
A
t=1
t - Ft
1 standard deviation 1.25 MAD
MAD =
n
1-29
30
40
A
Note that by itself, the MAD
t - Ft only lets us know the mean
t=1 40
MAD = = = 10 error in a set of forecasts
n 4
1-31
32
1-33
34
a = y - bx
xy - n(y)(x)
b= 2 2
x - n(x )
1-34
35
Week Sales
1 150
2 157
3 162
4 166
5 177
1-35
36
b=
xy - n( y)(x) 2499 - 5(162.4)(3) 63
= = 6.3
x - n(x )
2 2
55 5(9 ) 10
155 Forecast
150
145
140
135
1 2 3 4 5
Perio
d
38
Web-Based Forecasting:
Steps in CPFR
1-39
40
End of Chapter 15