PREPARED BY: LINDSAY B.

BONCODIN
COURSE: MASTERS IN MANAGEMENT MAJOR IN BUSINESS ADMINISTRATION,
1ST YEAR, AY 2022-2023
SUBJECT: MM 215-OPERATIONS MANAGEMENT
REACTION PAPER
FORECASTING AND DEMAND PLANNING
In every aspect of management there is a need for forecasting. It is also important in the
operations management.
Forecasting is a step before planning happens. This process is an attempt to predict the
future value of a changing variable. They are taking influence from the known facts. These facts
are data and information that have taken place in the past. However, forecasts does not produce
perfect results. There is a difference between what is forecasted and what actually happened. In
addition, forecasts are more accurate for groups of items rather than individual items. Specifically
forecasts are more applicable to short term than longer time horizon. Since forecasts is a systematic
process, it follows a sequence. First one is to decide what is to forecast. Next is to evaluate and
analyze appropriate data. Then select and test the forecasting model. Moreover it needs to generate
the forecast. Lastly is to monitor the forecast accuracy.
There are two types of forecasting methods that is widely used, the qualitative and
quantitative methods. Qualitative method is often called “judgemental methods’. This method is
done subjectively, they are educated guesses made by forecasters and experts based on intuition,
knowledge and experience. They are somehow biased in which can reduce forecasts accuracy.
There are three types of qualitative method; the executive method, market research and delphi
method. Executive opinion is a method in which a group of managers meet and collectively
develop a forecast. It is frequently used for strategic forecasting. Meanwhile market research is an
approach that uses surveys and interviews to customer preferences and to identify new product
ideas. This is a good determinant of customer preferences. On the other hand, delphi method is a
forecast of product consensus among a group of experts. The quantitative method uses a
mathematical modelling. Since this method is mathematical in nature, they are consistent. These
methods are also objective and does not suffer from biases found in qualitative method. However
these forecasts is only good as the data available. There are two types of quantitative forecasting
and each has sub-category. Time series models has five types the naïve, simple mean, simple
moving average, weighted moving average and exponential smoothing. All of the mentioned types
has its own formulas use to arrive at a definite number. Time series models assume that all
information needed to generate a forecast is contained in the time series data. The next type is the
causal or associative models. It is also composed of two methods, the linear regression and multiple
regression. Forecasters assumed that the variable is somehow related to other variables in the
environment. Its job is to discover how these variables are related in mathematical terms and use
that information to forecast the future.
Forecasts is really important in the overall operations. It holds the totality function of the
system, from management, finance to accounting, human resources and marketing. It aims for the
betterment of the whole process.