chapter 3

Question 1

what are forecasts?

Answer 1

Basic inputs for many kinds of decision in organizations

Question 2

what is the most important applications of forecasting?

Answer 2

demand forecasting

Question 3

why is demand forecasting the most important kind of forecasting?

Answer 3

it is important for all managers to be able to understand and use demand forecasting to match up supply and demand

Question 4

what is demand forecasting?

Answer 4

the estimate of expected demand during a specific future period

Question 5

what are the 3 uses for demand forecasting?

Answer 5

to help managers design the system (long-term plans)

to help them plan the medium-term use of the system

to schedule the short term use of the syst3em

Question 6

what are the 2 most important aspects of demand forecasting?

Answer 6

the expected level of demand (forecast)

the degree of accuracy that can be assigned to the forecast (the potential size of the forecast error)

Question 7

who typically prepares the demand forecasts?

Answer 7

typically the marketing or sales department

Question 8

what is collaborative planning forecasting and replenishment (CPFR)?

Answer 8

when companies collaborate with supply chain partners on their forecasting process to get demand data

Question 9

how does accounting use forecasts?

Answer 9

new equipment/process cost estimates, profit projections and cash management

Question 10

how does finance use forecasts?

Answer 10

equipment/ replacement needs, timing and amount of funding/borrowing needs

Question 11

how does human resources use forecasts?

Answer 11

hiring activities, including recruiting, interviewing and training

Question 12

how does marketing use forecasts?

Answer 12

pricing and promotion, e-business strategies, and global competition strategies

Question 13

how does operations use forecasts?

Answer 13

schedules, capacity planning, work assignments and workloads

Question 14

how does product/service design use forecasts?

Answer 14

revision of current features, design of new products or services

Question 15

what are the 4 common features to all forecasting techniques?

Answer 15

they generally assume that the same underlying causal system that existed in the past will continue to exist in the future

they are rarely perfect

forecasts for groups of items tend to be more accurate than forecasts for individual items

forecast accuracy decreases the farther the forecasted time period is into the future

Question 16

what is the forecasting horizon?

Answer 16

the time period we are forecasting for

Question 17

what are the 7 elements of a good forecast?

Answer 17

forecast should be timely

forecast should be accurate

the forecasting method should be reliable

forecast should be expressed in meaningful units

forecast should be in writing

forecast technique should be simple to use and understand

forecast should be cost effective

Question 18

what are the 6 steps in the forecasting process?

Answer 18

determine the purpose of the forecast
establish a forecasting horizion
gather and analyze relevant historical data
select a forecasting method
prepare the forecast
monitor the forecast

Question 19

what are the 2 general approaches to forecasting?

Answer 19

judgmental (qualitative) method
quantitative method

Question 20

what information does judgmental method include?

Answer 20

soft information (human factors, personal opinions, hunches)

Question 21

what information does the quantitative method include?

Answer 21

mainly analyzing hard data (quantitative data)

Question 22

what is the judgmental method of forecasting?

Answer 22

using non quantitative analysis of historical data or analysis of subjective inputs from people

Question 23

what are the 2 kinds of quantitative methods?

Answer 23

time series models
associative models

Question 24

what are time series models?

Answer 24

they identify specific patterns in the data and extend the pattern of data into the future

Question 25

what are associative models?

Answer 25

they use equations that consist of one or more explanatory variables to predict future demand for the variable

Question 26

what are the 3 time horizons of forecasting?

Answer 26

long term (1-5 years) needs specific market data and expert knowledge medium term (next 12 months) mix of judgmental and quantitative methods short term (12 weeks) mostly quantitative method

Question 27

when relying on just judgmental forecasting, what are the 5 kinds of opinions used?

Answer 27

executive opinions sales force opinions consumer surveys historical analogies expert opinions

Question 28

what are executive opinions?

Answer 28

when a small group of upper-level managers may meet and collectively develop a forecast

Question 29

when are executive opinions typically used?

Answer 29

typically used as a part of long-term strategic planning and new product development

Question 30

what is the advantage of executive opinions?

Answer 30

bringing together considerable knowledge and talents of various managers

Question 31

what is the risk of executive decisions?

Answer 31

that the view of one person will prevail and the possibility of diffusing responsibility for the forecast over the entire group may result in less pressure to produce a good forecast

Question 32

what is the sales force opinion?

Answer 32

they opinion and information that they obtain through the direct contact with customers

Question 33

what are some risks of using sales force opinion?

Answer 33

sales people may be overly influenced by recent experiences in sales periods there can be a conflict of interest if wanting to create sales quotas

Question 34

what are consumer serveys?

Answer 34

the options of their customers

Question 35

when would consumer surveys be used?

Answer 35

when organizations are seeking consumer input

Question 36

what is the advantage of consumer surveys?

Answer 36

they can be very helpful in forecasting demand since they tap into information that is hardly available elsewhere

Question 37

what are some risks of consumer surveys?

Answer 37

acquiring reliable information through surveys could be costly and time consuming conducting surveys correctly interpreting results for valid insights can often require lots of knowledge and skill

Question 38

what are historical analogies?

Answer 38

when sometimes the demand for a similar product in the past 'after some adjustment can be used to forecaster the demand for a new products demand

Question 39

what is the Delphi method?

Answer 39

when experts complete a series of questionnaires, each developed from the precious one to achieve a consensus forecast

Question 40

when would the Delphi method be used?

Answer 40

for technological forecasting and assessing changes in technology and their impact on an organization

Question 41

what is the downside of the expert opinions (Delphi technique)?

Answer 41

they are often a long-term, single-time forecast that usually have very little hard information to go by or the data is costly to obtain

Question 42

what is a time series?

Answer 42

a time ordered sequence of observations taken at regular intervals of time

Question 43

what are forecasting techniques based on time series made on the assumption of?

Answer 43

they are using the assumption that future values of the series can be estimated from their own past values

Question 44

what are the 6 plotting patterns that might appear from time series?

Answer 44

level trend seasonality cycles irregular variations random variables

Question 45

what is "level pattern" time series?

Answer 45

a constant horizontal pattern of time series

Question 46

what is the "trend pattern" time series?

Answer 46

refers to a persistent upward or downward movement in the data

Question 47

what is the "seasonality pattern" time series?

Answer 47

refers to a regular wavelike variations generally related to factors like calendar, weather or recurring events

Question 48

what is the "cycles pattern" time series?

Answer 48

wavelike variations lasting more than one year

Question 49

what is "irregular variations" time series?

Answer 49

they are changes due to unusual circumstances not reflective of typical behaviour

Question 50

what are "random variations" time series?

Answer 50

residual variations that remain after all other behaviours have been accounted for