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Forecasting methods
Qualitative methods, Time series method,
Causal method, and Simulation method.
Qualitative methods:judgmental methods
advantage of critical knowledge
Time series method: using statistical tools on
past data to identify trend. Under stable
environmental situations and demand.
Moving average method
Causal method: correlating demand to specific
causal factors in environment. Estimate these
causal factors and forecast demand. Ambient
temperature and coffee consumption! Monsoon
06/24/08 rice production! 3
Simulation: this is a combination of time series
and causal methods. estimate the impact of causal
factors on demand
Basic approach to demand forecasting
Top down and bottom up
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Major factors that influence demand forecast:
Demand and promotions, one product stealing
demand of another product.
Forecast needs to be accurate if lead times are
longer. If supply sources are available with short
lead times forecast need not be very accurate.
Influence of product variants on each other is to
be judged and if required joint forecast may be
made.
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Appropriate technique for forecast
Take the dimensions of forecast into account to
determine forecasting method. These dimensions
are geographical area, product groups, and
customer groups
Take criteria into account-accuracy, time
horizon, data availability, experience of the
forecaster
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Establish performance and error measures to
use forecast accurately:
Lead time as a performance measure. Forecast
accuracy is required to be highest at the end of
this lead-time.
Difference between forecast and actual should
be measured for estimating error.
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