WEEK 4

Question 1

art and science of predicting future events.

Answer 1

Forecasting

Question 2

Elements of a Good Forecast:

Answer 2

▪ The forecast should be timely.
▪ The forecast should be accurate
▪ The forecast should be reliable.
▪ The forecast should be expressed in meaningful units.
▪ The forecast should be in writing.
▪ The forecast technique should be simple to understand and use.
▪ The forecast should be cost effective. (The benefits should
outweigh the costs.

Question 3

CLASSIFICATION OF FORECAST:

Answer 3

• Short Range Forecast
• Medium-range Forecast (Intermediate)
• Long-range Forecast

Question 4

• It has a time span of three months up to one year
• It is used for planning, purchasing, job scheduling, workforce levels, job
  assignments and production levels.

Answer 4

Short Range Forecast

Question 5

• It generally spans from one year to 3 years.
• It is useful in sales planning, production planning and budgeting, cash
  budgeting and analyzing various operating plans.

Answer 5

Medium-range Forecast (Intermediate)

Question 6

• It is generally 3 years or more
• It is used in planning for new products, capital expenditures, facility location or
  expansion, and research and development

Answer 6

Long Range Forecast

Question 7

TYPES OF FORECASTS:

Answer 7

• Economic Forecast
• Technological Forecast
• Demand Forecasts (Sales Forecasts)

Question 8

It addresses the business cycle by predicting inflation rates, money
supplies, housing starts, and other planning indicators.

Answer 8

Economic Forecast

Question 9

It is concerned with rates of technological progress, which can result in
the birth of new products, requiring new plants and equipment.

Answer 9

Technological Forecasts

Question 10

It is the projections of demand for a company’s products and services.

Answer 10

Demand Forecasts (Sales Forecasts)

Question 11

Steps in the Forecasting Process:

Answer 11

1. Determine the purpose of the forecast.
2. Establish the time horizon.
3. Obtain, clean and analyze appropriate data.
4. Select a forecasting technique.
5. Make the forecast.
6. Monitor the forecast errors.
7. Repeat 3 and 6 as new data become available.

Question 12

STRATEGIC IMPORTANCE OF FORECASTING:

Answer 12

1. Human Resources
2. Capacity
3. Supply-Chain Management

Question 13

➢Hiring, training and laying-off workers all depend on anticipated demand.

Answer 13

Human Resources

Question 14

➢When capacity is inadequate, the resulting shortages can mean undependable delivery,
or loss of customers, and loss of market share.

Answer 14

Capacity

Question 15

➢Good supplier relations and the ensuing price advantages for materials and parts
depend on accurate forecasts

Answer 15

Supply Chain Management

Question 16

FORECASTING APPROACHES:
Qualitative Forecasts

Answer 16

1. Jury of Executive Opinion
2. Sales Force Composite
3. Delphi Method

Question 17

FORECASTING APPROACHES:
Quantitative Forecasts

Answer 17

• Time-Series Models
  1. Naïve Approach
  2. Moving Averages
  a. Simple Moving Average
  b. Weighted Moving Average
  3. Exponential Smoothing (First Order
  Smoothing)
  4. Exponential Smoothing with Trend
  Adjustment (Second Order or Double
  Smoothing)
  5. Trend Projections
• Associative Models or Causal Models
• Linear Regression Analysis

Question 18

intuition, emotions, personal
experiences, and value system in reaching a forecast.

Answer 18

Qualitative Forecast

Question 19

forecasting technique that takes the opinion of a small group of high-level managers

Answer 19

Jury of Executive Opinion

Question 20

forecasting technique based upon salesperson’s estimates of
expected sales.

Answer 20

Sales Force Composite

Question 21

forecasting technique using a group process that allows experts to make forecasts.

Answer 21

Delphi Method

Question 22

a group of 5 to 10 experts

Answer 22

Decision Makers

Question 23

• It is a group of people, often located in different places, whose judgments are valued.

Answer 23

Respondents

Question 24

inputs from customers or potential customers
regarding future purchasing plans.

Answer 24

Consumer Market Survey

Question 25

It predicts on the assumptions that the future is a function of the past.

Answer 25

Time Series Models

Question 26

It has four components: Time Series Models

Answer 26

1. Trend
2. Seasonality
3. Cycles
4. Random Variations

Question 27

gradual upward or downward movement

Answer 27

Trend

Question 28

repeats itself after a period of days, weeks,
months or quarters.

Answer 28

Seasonality

Question 29

patterns in the data that occur every several years. * It is usually tied into the business cycle

Answer 29

Cycles

Question 30

These are “blips” in the data caused by chance and unusual situations.
* They follow no discernible pattern, so they cannot be predicted

Answer 30

Random Variations