Forecast
 OM is mostly proactive not reactive
 It involves structured planning activities
 Planning requires data pertaining to the feature
 Forecast: A statement about the future
 Not necessarily numerical
 Weather forecast
Uses of Forecasts
 Plan the system - involves long range of planning about the
types of products and services to offer, what facilities and
equipment to have, where to locate, etc.
 Plan the Use of the System - refers to short range of planning.
This involves planning inventory, planning workforce level,
purchasing and production, budgeting and scheduling.
Features Common to all Forecasts
REMARKS
 Assume a causal system
 Future resembles the past
 Forecasts rarely perfect because of randomness
 Forecasts more accurate for groups vs. individuals.
 Forecasting errors among items in a group usually have
a cancelling effect.
 Extremes in a group cancel each other
 Ex. I can forecast the class average from the
midterm better than Mrs. X's individual grade.
 Sample variance of (-1,1,-1,1) is 1.
 Sample variance of ((-1-1)/2, ((-1+1)/2) is 0
 Forecast accuracy decreases as time horizon for forecasts
increases
 Ex. I can forecast this year's class average better than
next year's class average
 1. Determine the purpose of the forecast
What is its purpose and when will it be needed? This will
Elements of a Good Forecast provide an indication of the level of detail required in the
 Time- a certain amount of time is needed to respond to the forecast, the amount of resources (personnel, computer time,
information contained in a forecast and dollars) that can be justified, and the level of accuracy is
 Accurate- This will enable users to plan for possible errors and necessary.
will provided a basis for comparing alternative forecasts
2. Establish a time horizon
 Reliable- it should work consistently
The forecast must indicate a time limit, keeping in mind that
 Meaningful Units- it should be expressed in units such as
accuracy decreases as the time horizon increases.
dollars, units, machines, skills, etc.
 In writing or written- a written forecast will permit an objective
3. Select a forecasting technique
basis for evaluating the forecast once actual results are in
 Simple to Use and Understand- make sure all of the people
4. Gather and analyze relevant data
involved in the planning and forecasting can easily understand
Before a forecast can be prepared, data must be gathered and
the techniques that will be used
analyzed. Identify any assumptions that are made in
conjunction with preparing and using the forecast.

Steps in the Forecasting Process 5. Prepare the forecast.

Use an appropriate technique.

6. Monitor the forecast

A forecast has to be monitored to determine whether it is
performing in a satisfactory manner. If it is not, re-examine the
method, assumptions, validity of fate, and so on; modify as
needed; a prepare a revised forecast.
Approaches to Forecasting

There are two general approaches to forecasting:  Executive opinions

 There are factors hard to quantify
 Qualitative Methods
 Ex. Effects of November 2004 election on new houses
 consist mainly of subjective inputs, which often
built in 2005
defy precise numerical description.
 Sales force composite
 Quantitative Methods
 Retailer forecasts for the manufacturer
 involve either the extension of historical data or
 Consumer surveys
the development of associative models that
 The guy at the mall who asks if you like cherry
attempt to utilize causal (explanatory) variables
flavour in your shampoo
to make a forecast
 Outside opinion
Types of Forecasts  Financial and consulting gurus and companies
 Opinions of managers and staff
 Delphi method: A series of questionnaires
 Judgemental developed sequentially
 Subjective analysis of subjective inputs
 Associative Models
 Analyses historical data to reveal relationships
Delphi method
between (easily or in advance) observable
quantities and forecast quantities. Uses this  Managers and staff complete a series of
relationship to make predictions. questionnaires, each developed from the previous
 Time Series one, to achieve a consensus forecast.
 Objective analysis historical data assuming the
future will be like the past
ASSOCIATIVE FORECASTS

FORECASTS BASED ON JUDGMENT AND OPINION  Forecasting technique that uses explanatory variables to
predict future demand.
 Forecasts that use subjective inputs such as opinions from
consumer surveys, sales staff, managers, executives, and
experts.
Based on identification of related variables that can be used to predict
values of the variable of interest.
 Sales of mountain bikes in an area may be related to the
percentage of the young population living in that area.
 Sales of Harley-Davidson motorbikes is related to mid-aged
men population. Average age of H-D owners is 46.
Behavior of the series:
 Ice cream sales can be related to temperature
 Home depot bases sales forecasts on mortgage refinancing
rates. Smaller rates imply higher sales.
 Changes in Federal Reserve Board's interest rate leads to
certain business activities
 House sales
 Industrial investments
 Increase in energy cost leads to price increases in products
and
FORECASTS BASED ON TIME SERIES DATA
 A time-ordered sequence of observations taken at regular
intervals over time.
 Find an association between the predictor and the predicted
 Predictor variables- used to predict values of variable
interest, sometimes called independent variables
 Predicted variable- Dependent variable
 Regression- techniques for fitting a line to a set of points
 Linear regression is the most widely used form of regression
 The objective is to obtain an equation of a straight line that
minimizes the sum of squared vertical deviations of data
points from the line.
 Trend
 A long-term upward or downward movement in data.
Population shifts, changing incomes, and cultural changes
often account for such movements.
 Seasonality
 Refers to short-term, fairly regular variations generally
related to factors such as the calendar or time of date.
Restaurants, supermarkets, and theatre’s experience
weekly and even daily “seasonal” variations.
 Cycles
 Are wavelike variations of more than one year’s duration.
These are often related to a variety of economic, political,
and even agriculture conditions
 Irregular variations
 Are due to unusual circumstances such as severe weather
conditions, strikes, or a major change in a product or
service. They do not reflect typical behaviour, and inclusion
in the series can distort the overall picture. Whenever
possible, these should be identified and removed from the
data.
 Random variations
 Are residual variations that remain after all other behaviors
have been accounted for
TIME SERIES
 Time-ordered sequence of observations taken at regular
intervals over a period of time
 Future values of the series can be estimated from past values.
Types of Variations in Time Series Data
 Trend- long-term movement in data
 Seasonality- short-term regular variations in data
 Cycles- wavelike variations of long-term
 Irregular variations- caused by unusual circumstances
 Random variations- caused by chance
TIME SERIES MODELS: VARIATIONS
WHAT IS RANDOM AND WHAT IS NOT?
 Historical data contain random variations or noise
 Random variations are caused by relatively unimportant factors
 What is random? Can we not study everything to negligible
detail? “God does not roll dices” – A.E.
 The objective is to remove all randomness and have real
variations
 Minor variations are random and large ones are real
CHOOSING A FORECASTING TECHNIQUE
The two most important factors are COST and ACCURACY. How much
money is budgeted for generating the forecast? What are the possible
costs of errors, and what are the benefits that might accrue from an
accurate forecast? Generally speaking, the higher the accuracy, the
higher the cost, so it is important to weigh cost-accuracy trade-offs
carefully. The best forecast is not necessarily the most accurate or the
least costly; rather, it is some combination of accuracy and cost
deemed best by management.
CHOOSING A FORECASTING TECHNIQUES
No single technique works best in every situation
 The forecast horizon
 Forecasting frequency
 Forecasting is not free
 Consider cost and accuracy
 Weigh cost-accuracy trade-offs carefully
 Forecast detail, part/ product level?
 Availability of
 Historical data
 Computers
 Able users/ decision makers
Product and Service Design  Motivation

“Satisfy the customer while making a reasonable profit”  (new) to achieve the goals of the organization.
 (existing) government regulations, the appearance of
 Objective of business new technologies that have product and processes
applications, competitive pressures, and customer
needs.
Product and service design
 or redesign
 Customer
 should be closely tied to an organization’s strategy
 the driving force for product and service design.

 Ideas for new or improved designs

Designing for Manufacturing

Design for Manufacturing (DFM)   -Marketing (focus groups, surveys, and analyses of
 The designers’ consideration of the organization’s buying patterns).
manufacturing capabilities when designing a product.
 For tangible items  Competitors
 For product only
 wag mapagiwanan

Designing For Operations

 The more general term than design for manufacturing  Reverse Engineering
encompasses services as well as manufacturing o is the dismantling and inspecting of a
 Concerns both product design and service design competitor’s product to discover product
 Failure to take this into account can: improvements.
o get ideas from competitors
 Reduce productivity o inspect competitors and create goods para
 Reduce quality matapatan to.
 Increase costs
 Bench Marketing
o Competitors visits other competitors to check
services they provide

The Design Process  Capabilities

 o Design – must clearly understand the of production
(equipment, skills, materials, schedules, technologies).
o Management must consider the potential
o for expanding or changing capabilities.
 Forecast
o Predicting the future
o Assuming what will happen in the future
o Prediction- not 100% that will happen
 Organized efforts to increase scientific knowledge or product
innovation & may involve:
o Basic Research advances knowledge about a subject
without near-term expectations of commercial
applications.
o Applied Research achieves commercial applications.
o Development converts results of applied research into
commercial applications.

MANUFACTURABILITY Standardization

 Lessen defects  Standardization

 Manufacturability is the ease of fabrication and/or assembly o Extent to which there is an absence of variety in a
which is important for: product, service or process
o Cost o Pare pareho
o Productivity  Standardized products are immediately available to customers
o Quality

Humor in Product Design

Advantages of Standardization
 Lack of communication
 Fewer parts to deal with in inventory & manufacturing
Regulations & Legal Considerations  Design costs are generally lower
 Reduced training costs and time
 Product Liability  More routine purchasing, handling, and inspection procedures
 Quality is more consistent
 A manufacturer is liable for any injuries or damages  Orders fillable from inventory
caused by a faulty product.  Opportunities for long production runs and automation
 Use precaution para makalusot sa product liability  Need for fewer parts justifies increased expenditures on
perfecting designs and improving quality control procedures.
 Uniform Commercial Code
Disadvantages of Standardization
 Products carry an implication of merchantability and
fitness.  Designs may be frozen with too many imperfections remaining.
 Nakapasa sa quality inspections  High cost of design changes increases resistance to
improvements.
Research & Development (R&D)  Decreased variety results in less consumer appeal.
  the customer are already buying the product

PRODUCT DESIGN  Saturation

 -bumabagsak na
 Product Life Cycles
 Robust Design
 Concurrent Engineering  Decline
 Computer-Aided Design  wala na talaga bumibili
 Modular Design

Robust design

PRODUCT LIFE CYCLES  design that results in products or services that can function over
a broad range of conditions
 Incubation  hindi naaapektohan ang product kahit umulan, umaraw,
 Growth bumagyo, mag snow
 Maturity
 Saturation
 Decline
Product life cycles Taguichi approach robust design

 Incubation  Design a robust product

 introduction stage  insensitive to environmental factors either in
 new in the market manufacturing or in use
 most expensive stage  Central feature is Parameter Design
 involves determining the specification settings for both
the product and the process that will result in robust
 Growth design in terms of manufacturing variations, product
 nag iimprove palang deterioration, and conditions during use.

 Determines:
 Maturity
 peak o factors that are controllable and those not controllable
 best of product o their optimal levels relative to major product advances
 no longer accepting flaws or error
Concurrent engineering

 is the bringing together of engineering design and Service Design

manufacturing personnel early in the design phase
 Service is an act
 nag uusap na
 Service delivery system
 para maiwasang ang over the wall approach
o Facilities
o Processes
o Skills
Over the wall approach
 Many services are bundled with products
 Tasks being performed sequentially and with very little  Service design involves
need for communication or collaboration. o The physical resources needed
o The goods that are purchased or consumed by the
customer
Computer-Aided Design o Explicit services
o Implicit services
 Computer-Aided Design (CAD) is product design using
computer graphics.is product design using computer graphics: Service Design
o Increase productivity of designers, 3 to 10 Times
 Service
o creates a database for manufacturing information on
o Something that is done to or for a customer
product specifications
 Service delivery system
o provides possibility of engineering and cost analysis on
o The facilities, processes, and skills needed to provide a
proposed designs
service
Modular Design  Product bundle
o The combination of goods and services provided to a
 may kanya kanyang part- pag nasira ang isa, yun lang ang customer
papalitan  Service package
 modular design is a form of standardization in which o The physical resources needed to perform the service
component parts are subdivided into modules that are easily
replaced or interchanged. It allows:
o Easier diagnosis and remedy of failures
Differences Between Product and Service Design
o Easier repair and replacement
o Simplification of manufacturing and assembly  Tangible – intangible
  Services created and delivered at the same time 3. Identify potential failure points.
 Services cannot be inventoried 4. Establish a timeframe for service execution, and an
 Services highly visible to customers estimate of variability in processing time requirements.
 Location important to service 5. Analyze profitability.
 Range of service systems
 Demand variability

Design Guidelines

 Have a single, unifying theme, such as convenience or speed.

 Make sure the system has the capability to handle any
expected variability in service requirements.
 Include design features and checks to ensure that service will
be reliable and will provide consistent high quality.
 Design the system to be user friendly.

Service Blueprinting

 Service blueprinting
o A method used in service design to describe and
analyze a proposed service
Quality Function Deployment
 A useful tool for conceptualizing a service delivery system
 An approach that integrates the “voice of the customer” into
the product and service development process.
Major Steps in Service Blueprinting

 Establish boundaries for the process and decide on the level of

detail that will be needed.

1. Identify the steps involved and describe them.

2. Prepare a flowchart