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ppt

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2100593
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FORECASTING

Intended Learning Outcomes:


- Understand the need for forecasting

and the role it plays in decision


making.
- Relate the importance/significance of

forecasting in business
- Describe the types of forecasts
- Create a forecast using quantitative

forecasting methods.
Basic Concepts
Forecast
-Is a prediction, estimate, or

determination of what will occur in the


future (sales, interest rates, funds,
GNP, etc.) based on a certain set of
factors ( past data, opinion, company
data, or perceived pattern related to
time)
Time Horizons of Forecast
-Short-term ( 1 day to 1 year )
-Intermediate ( 1 to 2 years )
Classifications of
Forecasting
 Qualitative
– based on judgments or
opinions and is subjective in nature;
does not rely on mathematical
computations

 Quantitative – based on quantitative


models and is objective in nature;
relies heavily on mathematical
computations
Types of Qualitative
Forecast
 Delphi Method – based on the
principle that “responses from the
first questionnaires are used and
considered in preparing the second
set of questionnaires
 Jury of Executive Opinion – based on

the judgment of a single expert or a


consensus of the group of experts
 Sales Force Composite
 Consumer Market Survey
Types of Quantitative
Forecast
 Time Series – it is an attempt to
predict the future by means of
historical data and a set of ordered
observations
Methods:
a. Simple Moving Average
b. Weighted Moving Average
c. Exponential Smoothing
 Trend Line – uses a statistical method

known as the Least Squares Method


 Naïve Forecast – uses the actual
demand for the past period as the
forecasted demand for the next
period
 Causal Forecasting – uses a cause-

effect relationship with one or more


variables
Time Series Methods
EXAMPLE:
The SHY motorcycle dealer in Tug. City
wants to accurately forecast the
demand for the SHY hybrid motorcycle
during the next month. Because the
distributor is in Japan, it is difficult to
send motorcycle back or recorded if the
proper number of motorcycles is not
ordered a month ahead. From sales
records, the dealer has accumulated
the following data for the past 8
months.
Month Demand
Apr 90
May 10
Jun 80
Jul 150
Aug 70
Sept 110
Oct 150
Nov 130
REQUIRED:
1. Compute the three and five-month
forecasts for December demand using
simple moving average
Solution:
Fdec = 130 + 150 + 110 / 3
= 130

Fdec = 130 + 150 + 110 + 70 + 150 / 5


= 122
REQUIRED:
2. Determine the weighted moving
average forecast for December demand
with the following weights:
20%, 30%, and 50%
Solution:
Fdec = (130 x .50) + (150 x .30) + (110 x .20)
=65 + 45 + 22
= 132
REQUIRED:
3. Establish the forecasts for December
using exponential smoothing of
a. 0.10 b. 0.30
Solution:
a. Fdec = ( 130 x .10) + ( *94 x .90)
= 13 + 84.6
= 97.6 ~ 98
b. Fdec = (130 x .30) + (*94 x .70)
= 39 + 65.8
= 104.8 ~ 105
*Initial forecast = (90+10+80+ 150+70+110+150 / 7)
• = 660/7
• = 94.29 ~ 94
NAÏVE Forecast
1st pattern

Fdec = 130

nd
2 Pattern

Fdec = 110
THANK YOU!

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