Chapter 8 Forecasting Flashcards by Kellyn Smith

What is the process of predicting future events

Forecasting

How well did you know this?

Not at all

Perfectly

What is the process of selecting actions in anticipation of the forecast ( is made in response to the forecast)

Planning

How well did you know this?

Not at all

Perfectly

What 4 departments are impacted by forecasting?

Marketing
Finance
Operations
Sourcing

How well did you know this?

Not at all

Perfectly

What department relies on forecasts to develop estimates of demand and future sales?

Marketing

How well did you know this?

Not at all

Perfectly

What departments relies on forecasts to assess financial performance and capital investment needs, predict stock prices and investment portfolio returns, and set budgets

Financing

How well did you know this?

Not at all

Perfectly

What department relies on forecasts to make purchasing decisions and select suppliers

Sourcing

How well did you know this?

Not at all

Perfectly

T/F- Proper planning for the future starts with a forecast

True

How well did you know this?

Not at all

Perfectly

What are the 2 impacts of forecasting on supply chain management

1) Independent forecasting by supply chain members result in the bullwhip effect
2) Leads to mismatch b/w supply and demand throughout supply chain

How well did you know this?

Not at all

Perfectly

What are the principles of forecasting?

1) Forecasts are rarely perfect
2) Aggregate forecasts are more accurate (forecast will be more accurate if forecasting enrollment for all LOGT classes vs. each individual LOGT course)
3) Forecasts are more accurate in shorter horizons

How well did you know this?

Not at all

Perfectly

What are the two types of forecast methods?

1) Qualitative
2) Quantitative

How well did you know this?

Not at all

Perfectly

What does qualitative mean?

based off judgement or subjective opinions not facts

How well did you know this?

Not at all

Perfectly

What does quantitative mean?

basing decisions off of calculations and data

How well did you know this?

Not at all

Perfectly

T/F- Forecasting drives all other business decisions

True

How well did you know this?

Not at all

Perfectly

Planning involves what 3 decisions?

1) Scheduling existing resources
2) Determining Future Needs
3) Acquiring new resources

How well did you know this?

Not at all

Perfectly

Why do firms confuse forecasting and planning?

Because firms can impact their own demand
( this is referred to as demand management)

How well did you know this?

Not at all

Perfectly

How can firms impact their own demand?

By offering incentives, discounts, and promotional ads

How well did you know this?

Not at all

Perfectly

The process of influencing demand is known as

Demand Management

How well did you know this?

Not at all

Perfectly

What department is responsible for linking the organization to its customers

Marketing

How well did you know this?

Not at all

Perfectly

What department organizes the transformation of raw materials into finished products and services

Operations

How well did you know this?

Not at all

Perfectly

What is the department responsible for linking the organization to its suppliers

Sourcing

How well did you know this?

Not at all

Perfectly

What department am I describing based off their jobs?
- Balancing inventory across the network
- Optimizing transportation
-Customer service metrics

Logistics

How well did you know this?

Not at all

Perfectly

What department am I describing based off their jobs?
- Setting budgets

Finance

How well did you know this?

Not at all

Perfectly

What department am I describing based off their jobs?
- makes purchasing decisions
- selects suppliers

Sourcing

How well did you know this?

Not at all

Perfectly

What department am I describing based off their jobs?
- estimating demand
- future trends

Marketing

How well did you know this?

Not at all

Perfectly

What department am I describing based off their jobs? - capacity planning - scheduling -inventory levels

Operations

What kind of methods are useful when identifying customer buying patterns, expectations, and estimating sales of new products?

Qualitative

What are the 3 qualitative forecasting methods?

- Executive Opinion - Market Research - Delphi Method

A group decision making process, subject to bias is known as

Executive Opinion

Surveys and interviews used to collect preferences is known as

Market Research

A consensus is developed from anonymously contributed expert information is known as

The Delphi Method

What forecast methods are used for the Quantitative forecasts?

Time Series Model Casual Models

This model generates the forecast from an analysis of a "time series" of the data

Time Series Model

This model assumes that the variable being forecast is related to other variables in the environment

Casual Models

What are the strengths of the Qualitative forecast?

- Highly responsive to latest changes in environment -Can compensate for "one-time" or unusual events -Can include "inside" and "soft" information difficult to quantify - Provide user ownership

What are the weaknesses of the Qualitative forecast?

- Cannot consider many variables - Influenced by the short term - Difficulty in understanding relationships -Biased (optimism, political manipulation, lack of consistency)

What are the strengths of the Quantitative forecast?

- Can consider many variables and complex relationships - Objective -Consistent - Can process large amounts of info

What are the weaknesses of the Quantitative forecast?

-Only as good as the data and model - slow to react to changing environments - Costly and time consuming to model "soft information" - Requires technical understanding

A list of data points of the variable being forecast over time is known as

A Time Series

What are 6 Time Series models called?

- Naive -Simple Mean -Simple Moving Average - Weighted Moving Average - Exponential Smoothing - Seasonal Index

Which time series model uses last period's actual demand value as a forecast for the next period? It is also easy to use, only good if data change little from period to period, and may be used if there is very limited historical data available

Naive Method

Which time series model uses an average of past data as a forecast? It is also good for level pattern, requires carrying a lot of data, and makes forecasts become more stable over time as the number of data points increase

Simple Mean Method

Which time series model has all data weighted equally and has the forecast made by averaging a specified number, n, of the most recent data It is also appropriate for level data pattern and forecast becomes more responsive as n decreases

Simple Moving Average

Which time series models computation is the same as a simple moving average except that managers have the option of specifying the weights assigned to data points

Weighted Moving Average

What is the forecast for May using a three-period weighted moving average where weights assigned, beginning with the most recent month, at 60%, 30% and 10%? Jan-38 Feb-27 March-35 April-42 May-

May = (42*.6)+(35*.3)+(27*.1)= 38.4 May = 38.4

What is the forecast for May using a three-period moving average? Jan-38 Feb-27 March-42 April-42 May-

May=[42+42+27]/3=37 May=37

What time series model is a forecasting model that uses a special weighted average procedure to obtain a forecast. It is also easy to use and understand, and provides good forecasts results

Exponential Smoothing

Café Nervosa forecast a monthly usage of cream to be 24 gallons in May. The actual usage in May was 28 gallons. What is the forecast for June given = 0.3 ?

June= (0.3)(28)+(0.7)(24)= 25.2 gallons June=25.2 gallons

What time series model computes the percentage amount by which data for each season are above or below the mean It is also a simple and logical procedure for computing seasonality and it is only useful when seasonality is confirmed to be present in the data

Seasonal Adjustment

What are the two casual models?

Simple Linear Regression Multiple Regression

A forecasting model that assumes a straight line relationship between a dependent variable and a single independent variable is known as

Simple Linear Regression

Define the term. extends linear regression by looking at a relationship between a dependent variable and multiple independent variables is known as

Multiple Regression

What is the straight line linear equation for the model?

Y= a +bX Y= dependent X= independent a= Y intercept of the straight line b= slope of the straight line

What is the multiple regression formula?

Y = β_0 + β_1X_1 + β_2X_2 +...+ β_k X_k

What are the three measures to help determine how are forecasts methods are performing?

- Cumulative Forecast Error (CFE) - Mean Absolute Deviation (MAD) _ Mean Square Error (MSE)

What is the equation for forecast error?

e=D-F e=forecast error for period t D=actual demand for period t F= forecast for period t

The cumulative sum of each period's error is

Cumulative Forecast Error = Σe_t

The average of the sum of the absolute errors is

Mean Absolute Deviation =Σ l Actual - Forecast l divide by n

The average of the squared errors is

Mean Square Error= Σ ( Actual - Forecast ) squared divided by n

Reminder

for MAD and MSE measures, select the forecasting method that provides the lowest value

Reminder

For CFE, the ideal value is 0, as this indicates there is no bias in the method selected

What effect refers to the increased volatility in orders as they propagate through the supply chain

Bullwhip Effect

This effect occurs when each individual company in the supply chain forecasts it’s own demand, plans it’s stocking levels, and makes its replenishment decisions independently of other companies in the chain

Bullwhip Effect

A collaborative process of developing joint forecasts and plans with supply chain partners

Collaborative Planning (CPFR)

An organization process intended to match supply and demand through functional collaboration

Sales and Operations Planning (S&OP)

What method is used to forecast sales, market trends, make strategic forecasts, or forecast new products

Executive Opinion

What is the advantage of executive opinion?

includes the latest information

What is the disadvantage of an executive opinion?

it is subject to many human biases

What forecast is based off analysis of patterns in the time series of data?

Time Series Models

What forecast is based on modeling relationships between variables?

Casual Models

Which model looks at data of student enrollment per semester at a university over the past 5 years?

Time Series

Which forecast believes that university enrollment may be related to unemployment rates, recession levels, or salaries?

Casual Models

What advantages come from Collaborative Planning, Forecasting and Replenishment

-By increasing value to customers -By sharing marketplace risks -By improving their overall performance

What does CPFR stand for?

Collaborative Planning, and Forecasting Replenishment

What does S&OP stand for

Sales and Operations Planning

What are the 4 categories of the CPFR Model?

Analysis Strategy and Planning Demand & Supply Management Execution