Professional Documents
Culture Documents
Week-5
Forecasting
Disney Land Case Study Demand Patterns and Forecasting Techniques Design of Forecasting Systems
Reliable
Accurate
Written
Types of Forecasts
Qualitative Methods Judgmental - uses subjective inputs Quantitative Methods Time series - uses historical data assuming the future will be like the past Associative models / Econometric / Causal Methods- uses past time series on many relevant variables to produce the forecast for the variable of interest. Basis is the causeand-effect relationship between the variable forecasted and other time series selected. A common method is Regression Analysis
Demand Patterns
The repeated observations of demand in their order of occurrence form a pattern known as time series. Five basic patterns: Horizontal Trend Seasonal Cyclical Random
Steps in Forecasting
The forecast
Step 5 Prepare the forecast Step 4 Gather and analyze data Step 3 Select a forecasting technique
Step 2 Establish a time horizon Step 1 Determine purpose of forecast
1. Judgment Methods
In some cases, these are the only way to make a forecast. In others, these can be used to modify forecasts generated quantitatively. Four types are common:
1) 2) 3) 4)
"This 'telephone' has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us." -- Western Union internal memo, 1876
2. Causal Methods
Linear Regression Analysis Reading from the course pack.
Problem: The Renovators construction company renovates old homes in Sacramento. Over time, they have found that companys dollar volume of renovation work is dependent on the Sacramento areas payroll. Management wants to establish a mathematical relationship to help predict sales.!!!!!!!!!!!!!!!!!!!!!!!!