27-11-2012, 02:14 PM
Forecasting
Forecasting.ppt (Size: 369.5 KB / Downloads: 309)
Objectives
Give the fundamental rules of forecasting
Calculate a forecast using a moving average, weighted moving average, and exponential smoothing
Calculate the accuracy of a forecast
Why is forecasting important?
Demand for products and services is usually uncertain.
Forecasting can be used for…
Strategic planning (long range planning)
Finance and accounting (budgets and cost controls)
Marketing (future sales, new products)
Production and operations
What’s Forecasting All About?
Ahead of the Oscars, an economics professor, at the request of Weekend Journal, processed data about this year's films nominated for best picture through his statistical model and predicted with 97.4% certainty that "Brokeback Mountain" would win. Oops. Last year, the professor tuned his model until it correctly predicted 18 of the previous 20 best-picture awards; then it predicted that "The Aviator" would win; "Million Dollar Baby" won instead.
Sometimes models tuned to prior results don't have great predictive powers.
Some general characteristics of forecasts
Forecasts are always wrong
Forecasts are more accurate for groups or families of items
Forecasts are more accurate for shorter time periods
Every forecast should include an error estimate
Forecasts are no substitute for calculated demand.
Some Important Questions
What is the purpose of the forecast?
Which systems will use the forecast?
How important is the past in estimating the future?
Answers will help determine time horizons, techniques, and level of detail for the forecast.
Which Forecasting Method Should You Use
Gather the historical data of what you want to forecast
Divide data into initiation set and evaluation set
Use the first set to develop the models
Use the second set to evaluate
Compare the MADs and MFEs of each model