Module3 Flashcards
(14 cards)
What are the three forecasting horizons?
-
Strategic (3+ years)
- New product planning
- Facility location -
Tactical (3 months - 3 years)
- Sales & production planning
- Budgeting -
Operational (Up to 1 year)
- Purchasing
- Workforce levels
What is demand forecasting?
Demand forecasting: Calculating or predicting future demand of a product or service, typically by analysing historical data.
What are the major steps in demand forecasting?
- Understand the objective of forecasting
- Integrate forecasting across the supply chain
- Identify factors influencing demand
- Forecast at an appropriate level of aggregation
- Establish performance & error measures
Why is forecasting crucial in a supply chain?
- Basis for planning decisions
- Influences production, sales, inventory, workforce planning, and promotions
- Needed across various firm functions
What are the consequences of poor forecasting?
- Major financial impact
- Excess resources if forecast too high
- Customer loss and missed profits if forecast too low
- Misallocation of inventory, facilities, and resources
What is the Delphi Method?
Delphi Method: A structured communication technique, based on expert panels, leveraging the ‘wisdom of the crowd’.
What are the two main types of forecasting methods?
- Qualitative (e.g., Delphi, Historical Analogy)
- Quantitative (e.g., Causal, Time Series)
Define the components of the systematic component in time series.
- Level: Current deseasonalised demand
- Trend: Growth or decline in demand
- Seasonality: Predictable fluctuations
What is a causal model?
Causal model: Predicts one parameter based on others (e.g., Demand = f (interest rates, GDP growth))
How does moving average work in demand forecasting?
- Average demand over recent periods
- Choice of period (N) affects accuracy
- Adjusts forecast after observing new demand
Describe simple exponential smoothing.
- Used for demand with no trend or seasonality
- Adjusts forecast using recent demand data
- Controlled by alpha parameter for smoothing
What is the bullwhip effect?
Bullwhip effect: Greater distortion of information further up the supply chain due to inaccurate forecasts.
What is big data?
Big data: Data characterised by Volume, Variety, Velocity, and Veracity; enables advanced data storage and analysis.
What are potentials of AI in demand forecasting?
- Aggregates data from multiple sources
- Adapts in real time
- Supports strategic decision-making with accurate forecasts
