Forecasting

Mira Meilia M, SE,MM

 What is Forecasting?

¨ Process of predicting a Sales will be

$200 Million!
future event
¨ Underlying basis of
all business decisions
¨ Production
¨ Inventory
¨ Personnel
¨ Facilities
Types of Forecasts by Time Horizon

• Short-range forecast
– Up to 1 year; usually less than 3 months
– Job scheduling, worker assignments
• Medium-range forecast
– 3 months to 3 years
– Sales & production planning, budgeting
• Long-range forecast
– 3+ years
– New product planning, facility location
 Types of Forecasts
• Economic forecasts
– Address business cycle, e.g., inflation rate,
money supply etc.
• Technological forecasts
– Predict rate of technological progress
– Predict acceptance of new product
• Demand forecasts
– Predict sales of existing product
 Seven Steps in Forecasting

• Determine the time horizon of the forecast

• Determine the use of the forecast
• Select the items to be forecasted
• Select the forecasting model(s)
• Gather the data
• Make the forecast
• Validate and implement results
 Teknik Peramalan
• Pendekatan kualitatif : menggabungkan faktor
– faktor yaitu pengalaman si pengambil
keputusan atapun intuisi (opini dewan
eksekutif, metode delphi / sekelompok ahli
melakukan peramalan, gabungan karyawan
bagian penjualan)
• Quantitative Approaches : menggunakan
model matematika berdasar data historis
• Qualitative Approaches
• Quantitative Approaches
Overview of Quantitative Approaches

• Naïve approach
• Moving averages Time-series Models

• Exponential smoothing
• Trend projection
Associative
• Linear regression models
Quantitative Forecasting Methods
(Non-Naive)
Quantitative
Forecasting

Time Series Associative

Models Models

Moving Exponential Trend Linear

Average Smoothing Projection Regression
 Moving Average Method
• MA is a series of arithmetic means
• Used if little or no trend
• Used often for smoothing
– Provides overall impression of data over time
• Equation

MA   Demand in Previous n Periods

n
 Moving Average Solution
Time Response Moving Moving
Yi Total Average
(n=3) (n=3)
1998 4 NA NA
1999 6 NA NA
2000 5 NA NA
2001 3 4+6+5=15 15/3 = 5
2002 7
2003 NA
 Moving Average Solution
Time Response Moving Moving
Yi Total Average
(n=3) (n=3)
1998 4 NA NA
1999 6 NA NA
2000 5 NA NA
2001 3 4+6+5=15 15/3 = 5
2002 7 6+5+3=14 14/3=4 2/3
2003 NA
 Moving Average Solution
Time Response Moving Moving
Yi Total Average
(n=3) (n=3)
1998 4 NA NA
1999 6 NA NA
2000 5 NA NA
2001 3 4+6+5=15 15/3=5.0
2002 7 6+5+3=14 14/3=4.7
2003 NA 5+3+7=15 15/3=5.0
 Moving Average Graph

Sales
8 Actual
6
Forecast
4
2
95 96 97 98 99 00
Year
 Exponential Smoothing Method

• Form of weighted moving average

– Weights decline exponentially
– Most recent data weighted most
• Requires smoothing constant ()
– Ranges from 0 to 1
– Subjectively chosen
• Involves little record keeping of past data
THANK YOU