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06/24/08 1
Forecasting
[ref. Chopra & Meindl pages 68 to 75]
Starting point for all strategic planning
Importance of strategy in spite of uncertainty
Logistical areas of production scheduling,inventory control, and aggregate planning needdemand forecast
Characteristics of forecasting
Forecast error 
Accuracy of Short term/long term forecast
Accuracy of Aggregate/specific forecast,forecastfor automobiles as against forecast for specificmodels
 
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Components of forecast
Past demand
Planned advertising or marketing efforts
Planned price discounts
State of economy
Competitors’ actions
Manager’s knowledge and judgment
 
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Forecasting methods
Qualitative methods, Time series method,Causal method, and Simulation method.
Qualitative methods:
 judgmental methodsadvantage of critical knowledge
Time series method:
using statistical tools on past data to identify trend. Under stableenvironmental situations and demand.
Moving average method
Causal method:
correlating demand to specificcausal factors in environment. Estimate thesecausal factors and forecast demand. Ambienttemperature and coffee consumption! Monsoonrice production!
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