Professional Documents
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OM With Forecasting
OM With Forecasting
ME-420
BACHELORS OF ENGINEERING
MECHANICAL ENGINEERING DEPARTMENT NEDUET
IMPORTANCE OF OPERATIONS
MANAGEMENT
SUCCESS STORIES
HARD ROCK CAFÉ
AMAZON
KFC
INTRODUCTION
3
INPUTS
3 M’s
= 600 policies
(3 Employees)(40 Hours/Employee)
= 5 policies/hour
Multifactor Productivity
Convert all inputs & outputs to $ value
Process of
predicting a future
event
Underlying basis of
??
all business
decisions
Production
Inventory
Personnel
Facilities
12
Forecasting Time Horizons
Short-range forecast
Up to 1 year, generally less than 3 months
Purchasing, job scheduling, workforce levels, job
assignments, production levels
Medium-range forecast
3 months to 3 years
Sales and production planning, budgeting
Long-range forecast
3+ years
New product planning, facility location, research
and development
13
Types of Forecasts
Economic forecasts
Address business cycle – inflation rate, money
supply, housing starts, etc.
Technological forecasts
Predict rate of technological progress
Impacts development of new products
Demand forecasts
Predict sales of existing products and services
14
Seven Steps in Forecasting
15
Forecasting Approaches
Qualitative Methods
Used when situation is vague and little
data exist
New products
New technology
16
Forecasting Approaches
Quantitative Methods
17
Overview of Qualitative Methods
Delphi method
Panel of experts, questioned iteratively.
18
Overview of Qualitative Methods
19
Jury of Executive Opinion
20
Delphi Method
Iterative group process, Decision Makers
continues until (Evaluate responses
and make decisions)
consensus is reached.
3 types of participants
Decision makers Staff
Staff (Administering
Respondents survey)
Respondents
(People who can make
valuable judgments)
21
Overview of Quantitative Approaches
1. Naive approach
2. Moving averages
Time-Series
3. Exponential smoothing Models
4. Trend projection
22
Time Series Forecasting
23
Naive Approach
24
Moving Average Method
25
Moving Average Example
26
Graph of Moving Average
Weighted Moving Average
28
Weighted Moving Average
Weights Applied Period
3 Last month
2 Two months ago
1 Three months ago
6 Sum of weights
January 10
February 12
March 13
April 16 [(3 x 13) + (2 x 12) + (10)]/6 = 121/6
May 19 [(3 x 16) + (2 x 13) + (12)]/6 = 141/3
June 23 [(3 x 19) + (2 x 16) + (13)]/6 = 17
July 26 [(3 x 23) + (2 x 19) + (16)]/6 = 201/2
29
Moving Average and Weighted Moving Average
Weighted
30 – moving
average
25 –
Sales demand
20 – Actual
sales
15 –
Moving
10 – average
5 –
| | | | | | | | | | | |
J F M A M J J A S O N D
Figure 4.2
Exponential Smoothing
Form of weighted moving average
Weights decline exponentially
Most recent data weighted most
31
Exponential Smoothing
32
Exponential Smoothing Example
Exponential Smoothing Example
225 –
Actual α = .5
demand
200 –
Demand
175 –
α = .1
150 – | | | | | | | | |
1 2 3 4 5 6 7 8 9
Quarter
37
Impact of Different
Chose high values of when
underlying average is likely to
225 – change
175 –
= .1
150 – | | | | | | | | |
1 2 3 4 5 6 7 8 9
Quarter
38