Professional Documents
Culture Documents
Demand 4
PowerPoint presentation to accompany
Heizer and Render
Operations Management, Global Edition, Eleventh Edition
Principles of Operations Management, Global Edition, Ninth Edition
© 2014
© 2014
Pearson
Pearson
Education
Education 4-1
Outline
▶ What is Forecasting?
▶ Forecasting Approaches
✓ Qualitative Methods
✓ Quantitative Methods
▶ Naive Approach
▶ Moving Averages
▶ Exponential Smoothing
▶ Exponential Smoothing with Trend
Adjustment
▶ Trend Projections
▶ Seasonal Variations in Data
▶ Linear Regression
Trend Cyclical
Seasonal Random
Seasonal peaks
Actual demand
line
Average demand
over 4 years
Random variation
| | | |
1 2 3 4
Time (years)
Figure 4.1
0 5 10 15 20
© 2014 Pearson Education 4 - 16
Random Component
► Erratic, unsystematic, ‘residual’
fluctuations
► Due to random variation or unforeseen
events
► Short duration
and nonrepeating
M T W T
© 2014 Pearson Education F 4 - 17
Naive Approach
► Assumes demand in next
period is the same as
demand in most recent period
► e.g., If January sales were 68, then
February sales will be 68
► Sometimes cost effective and
efficient
► Can be good starting point
Moving average =
å demand in previous n periods
n
(( )(
Weighted å Weight for period n Demand in period n
moving =
))
average å Weights
25 –
Sales demand
20 –
15 – Actual sales
10 – Moving average
5–
| | | | | | | | | | | |
J F M A M J J A S O N D
Figure 4.2 Month
Ft = Ft – 1 + (At – 1 - Ft – 1)
OR
Ft = (At - 1) + (1 - )(Ft – 1)
Actual = .5
demand
200 –
Demand
175 –
= .1
150 – | | | | | | | | |
1 2 3 4 5 6 7 8 9
Quarter
© 2014 Pearson Education 4 - 31
Impact of Different
225 –
Actual = .5
► Chose
200 – high of
values
demand
when underlying average
Demand
is likely to change
► Choose low values of
175 –
MAD =
å Actual - Forecast
n
Σ|Deviations|
MAD = 10.31 12.33
n
å (Forecast errors)
2
MSE =
n
å (Forecast errors)
2
Quarter Unloaded
n
with
a = .10
for
a = .10
with
= .50
for
= .50
1 For 180
= .10 175 5.00 175 5.00
2 168 175.5 7.50 177.50 9.50
3 = 1,526.54/8
159 174.75 = 190.82
15.75 172.75 13.75
4 175 173.18 1.82 165.88 9.12
5 For 190
= .50 173.36 16.64 170.44 19.56
6 205 175.02
= 1,561.91/8 = 29.98
195.24 180.22 24.78
7 180 178.02 1.98 192.61 12.61
8 182 178.22 3.78 186.30 4.30
82.45 98.62
MAD 10.31 12.33
y^ = a + bx
where y^ = computed value of the variable to be predicted
(dependent variable)
a = y-axis intercept
b = slope of the regression line
x = the independent variable
Deviation5 Deviation6
Deviation3
Least squares method minimizes the
sum of Deviation
the squared
4
errors (deviations)
Deviation1
(error) Deviation2
Trend line, y^ = a + bx
| | | | | | |
1 2 3 4 5 6 7
Figure 4.4
Time period
© 2014 Pearson Education 4 - 45
Least Squares Method
Equations to calculate the regression variables
ŷ = a + bx
b=
å xy - nxy
å x - nx
2 2
a = y - bx
© 2014 Pearson Education 4 - 46
Least Squares Example
ELECTRICAL ELECTRICAL
YEAR POWER DEMAND YEAR POWER DEMAND
1 74 5 105
2 79 6 142
3 80 7 122
4 90
x=
å x 28
= =4 y=
å y 692
= = 98.86
n 7 n 7
()
2 79 4 158
3
a = y - bx = 98.8680
-10.54 4 = 56.70 9 240
4 90 16 360
5 105 ŷ = 56.70 +10.54x25
Thus, 525
6 142 36 852
7 122 49 854
Σx = 28 Σy = 692 Σx2 = 140 Σxy = 3,063
x=
å
Demandx in
= =4 y=
å
28year 8 = 56.70 y+ 10.54(8)
=
692
= 98.86
n 7 = 141.02,
n or 141
7 megawatts
140 –
130 –
120 –
110 –
100 –
90 –
80 –
70 –
60 –
50 –
| | | | | | | | |
1 2 3 4 5 6 7 8 9
Year Figure 4.5
© 2014 Pearson Education 4 - 50
Seasonal Variations In Data
The multiplicative
seasonal model can
adjust trend data for
seasonal variations
in demand
110 –
100 –
90 –
80 –
70 –
| | | | | | | | | | | |
J F M A M J J A S O N D
Time
© 2014 Pearson Education 4 - 58
San Diego Hospital
Trend Data Figure 4.6
10,200 –
10,000 –
Inpatient Days
9,800 – 9745
9702
9616 9659
9573 9766
9,600 – 9530 9680 9724
9594 9637
9,400 – 9551
9,200 –
9,000 – | | | | | | | | | | | |
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
67 68 69 70 71 72 73 74 75 76 77 78
Month
© 2014 Pearson Education 4 - 59
San Diego Hospital
1.06 –
1.04 1.04
Index for Inpatient Days
1.04 – 1.03
1.02
1.02 – 1.01
1.00
1.00 – 0.99
0.98
0.98 – 0.99
0.96 – 0.97 0.97
0.96
0.94 –
0.92 – | | | | | | | | | | | |
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
67 68 69 70 71 72 73 74 75 76 77 78
Month
© 2014 Pearson Education 4 - 61
San Diego Hospital
Period 67 68 69 70 71 72
10,200 –
10068
10,000 – 9911 9949
Inpatient Days
9,000 – | | | | | | | | | | | |
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
67 68 69 70 71 72 73 74 75 76 77 78
Month
© 2014 Pearson Education 4 - 63
Adjusting Trend Data
y^ = a + bx
4.0 –
Nodel’s sales
(in$ millions)
3.0 –
2.0 –
1.0 –
| | | | | | |
0 1 2 3 4 5 6 7
Area payroll (in $ billions)
© 2014 Pearson Education 4 - 67
Associative Forecasting
Example
SALES, y PAYROLL, x x2 xy
2.0 1 1 2.0
3.0 3 9 9.0
2.5 4 16 10.0
2.0 2 4 4.0
2.0 1 1 2.0
3.5 7 49 24.5
Σy = 15.0 Σx = 18 Σx2 = 80 Σxy = 51.5
x=
å x 18
= =3 y=
å y 15
= = 2.5
6 6 6 6
b=
å xy - nxy 51.5 - (6)(3)(2.5)
= = .25 a = y - bx = 2.5 - (.25)(3) = 1.75
å x - nx
2
80 - (6)(3 )
2 2
x=
å x 18
= =3 y=
å y 15
= = 2.5
6 6 6 6
b=
å xy - nxy 51.5 - (6)(3)(2.5)
= = .25 a = y - bx = 2.5 - (.25)(3) = 1.75
å x - nx
2
80 - (6)(3 )
2 2
x=
0å x 1 18 2
= =3
3 å
4 y 5 15 6
y =(in $ billions)
= = 2.5
7
Area payroll
6 6 6 6
b=
å xy - nxy 51.5 - (6)(3)(2.5)
= = .25 a = y - bx = 2.5 - (.25)(3) = 1.75
å x - nx
2
80 - (6)(3 )
2 2
Sales = $3,250,000
Nodel’s sales
(in$ millions)
3.0 –
Sales (in$ millions) = 1.75 + .25(6)
= 1.75 + 1.5 = 3.25 2.0 –
1.0 –
Sales = $3,250,000
| |
0 1 2
Area p
4.0 –
Nodel’s sales
(in$ millions)
3.0 –
2.0 –
1.0 –
| | | | | | |
0 1 2 3 4 5 6 7
Area payroll (in $ billions)
1.0 –
| | | | | | |
0 1 2 3 4 5 6 7
Figure 4.9 Area payroll (in $ billions)
S y,x =
å - aå y - bå xy
y 2
=
39.5 -1.75(15.0) - .25(51.5)
n-2 6-2
= .09375
= .306 (in $ millions)
4.0 –
Nodel’s sales 3.25
(in$ millions) 3.0 –
x x
(a) Perfect negative (e) Perfect positive
correlation y y correlation
y
x x
(b) Negative correlation (d) Positive correlation
x
(c) No correlation
–1.0 –0.8 –0.6 –0.4 –0.2 0 0.2 0.4 0.6 0.8 1.0
Correlation coefficient values
(6)(51.5) – (18)(15.0)
r=
é(6)(80) – (18)2 ùé(16)(39.5) – (15.0)2 ù
ë ûë û
309 - 270 39 39
= = = = .901
(156)(12) 1,872 43.3
ŷ = a + b1x1 + b2 x2