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Week 7

The document outlines the comprehensive steps involved in the forecasting process, including determining the purpose, establishing the time horizon, obtaining and analyzing data, selecting a forecasting technique, making the forecast, and monitoring its accuracy. Each step is illustrated with examples, such as forecasting sales of winter jackets to ensure adequate inventory. The importance of adjusting forecasts based on actual performance is also emphasized.

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9 views17 pages

Week 7

The document outlines the comprehensive steps involved in the forecasting process, including determining the purpose, establishing the time horizon, obtaining and analyzing data, selecting a forecasting technique, making the forecast, and monitoring its accuracy. Each step is illustrated with examples, such as forecasting sales of winter jackets to ensure adequate inventory. The importance of adjusting forecasts based on actual performance is also emphasized.

Uploaded by

blairelallaina
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

CBMEC 2100

Week 7
Discussion

IMEER JEAISA L. MAURICIO, CEMP, MBA


Instructor I
Lesson Objective:

1. Determine the steps of forecasting.


The Steps in Forecasting

• The steps outline the comprehensive


forecasting process—from clarifying
purpose and scope to choosing methods,
collecting and analyzing data, generating the
forecast, and finally ensuring the forecast is
validated and applied.
1. Determine the purpose of the forecast

• Define how the forecast will be used,


when it’s needed, its required level of detail,
the resources justified (e.g., personnel,
computing time, budget), and the desired
accuracy.
Example:
• The store manager wants to forecast sales of
winter jackets to ensure sufficient inventory
for the winter season, avoiding both
stockouts and overstock. The forecast
will support inventory purchasing
decisions.
2. Establish the time horizon

• Decide the forecast interval (short-,


medium-, or long-term), keeping in mind
that forecast accuracy generally diminishes
as the horizon lengthens.
Example:
• The forecast will cover a 4-month period
(November to February). This is a medium-
term forecast suitable for seasonal inventory
planning.
3. Obtain, clean, and analyze appropriate data

• Collect relevant data, clean it to remove


outliers or errors, and analyze it to
prepare for forecasting.
Example:
• The manager collects sales data from the
past 5 winters. They clean the data by
removing outliers (e.g., a one-time
promotional spike), check for seasonal
patterns, and notice that sales typically
peak in December and early January.
4. Select a forecasting technique

• Choose an appropriate method (e.g.,


qualitative forecasts, time-series methods,
regression models) based on the nature of the
data and context.
Example:
• Since historical data is available and seasonal
patterns are evident, the manager chooses
a seasonal time series model (e.g.,
seasonal moving average or seasonal
exponential smoothing).
5. Make the forecast

• Apply the chosen forecasting method to


generate the forecast.
Example:
• Using the chosen model, the manager
forecasts monthly sales as follows:

 November: 500 units

 December: 1,200 units

 January: 900 units

 February: 300 units


6. Monitor the forecast

• Track forecast accuracy over time. If


performance is unsatisfactory, revisit
methods, assumptions, or data, modify the
model as needed, and issue a revised
forecast.
Example:
• Throughout the season, actual sales are
tracked and compared to the forecast. If
December sales fall short or exceed
predictions, the manager adjusts January
orders accordingly and revises the model next
season based on performance.

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