CHAPTER : 8

FORECASTING
Forecast
A prediction of future event used for planning
purpose.

Forecasting method is based on:

1. Mathematical Models
2. Qualitative Methods
3. Combination of both
Methods Of Forecasting
Qualitative Method Quantitative Method
1. Depends on opinion of 1. Depends on data and
one or more experts. analytical techniques.
2. Data can be observed, 2. Data can be measured
not measured. accurately.
3. For Example; 3. For Example; Surveys
Interviews and Case and Experiments
studies.
Managing Demand
Includes:
1.Demand Patterns
2.Demand Management Options
Demand Patterns:
Time Series:
The repeated observations of demand for a service or
product in their order of occurrence.
Five basic patterns of most demand time series:
1. Horizontal
2. Trend
3. Seasonal
4. Cyclical
5. Random
Demand Management Options
The process of changing demand patterns using one
or more demand options.
1) Complementary Product
2) Promotional Pricing
3) Prescheduled Appointments
4) Reservations
5) Revenue Management
6) Backlogs
7) Backorders and Stockouts
Complementary Product:
Services or products that have
similar resource requirements but different demand
cycle.
For Example; Electronic devices and batteries,
keyboard and computers, tennis balls and rackets.

 Promotional Pricing:
A pricing method where a company
temporarily reduces the price of a product or service
to increase sales.
For Example; Discounts and Seasonal sales.
 Prescheduled Appointments:
Service providers often can schedule customers
for definite periods of order fulfillment. An appointment
systems assigns specific times for service to customers.
For Example; Doctors, dentist ,lawyers and automobile repair
shops.

 Reservations:
Reservation system is similar to appointment
systems, are used when the customers actually occupies or
uses facilities associated with the service.
For Example; Customers reserve hotel rooms, automobiles,
airline seats.
Revenue Management:
Sometimes called
yield management. It is the
process of varying price at the
right time for different
customer segments to maximize
revenues yielded by existing
supply capacity.
For Example; Airlines, hotels,
cruise lines, restaurants and
rental cars
 Backlogs:
An accumulation of customer
orders that a manufacturer has
promised for delivery at some future
date
 Backorder:
A customer order that cannot
be filled when promised or demanded
but is filled later.
 Stockout:
An order that cannot be
satisfied, resulting in a loss of the sale.