Amity Business School

Amity
AmityBusiness
BusinessSchool
School
MBA
MBAGeneral
GeneralSemester
Semester22
Operations
OperationsManagement
Management
Dr.
Dr.Ranjit
RanjitRoy
Roy

OM, Ch. 1
11Goods,
Forecasting
Services,
and and
Demand
Operations
Planning
Management
©2009 South-Western, a part of Cengage Learning
1
 Amity Business School
Exhibit 11.11 Factory Energy Costs

OM, Ch. 1
11Goods,
Forecasting
Services,
and and
Demand
Operations
Planning
Management
©2009 South-Western, a part of Cengage Learning
2
 Amity Business School
Exhibit 11.14 Least-Squares Regression Model for Energy Cost Forecasting

OM, Ch. 1
11Goods,
Forecasting
Services,
and and
Demand
Operations
Planning
Management
©2009 South-Western, a part of Cengage Learning
3
 Amity Business School
Exhibit 11.15 2004 Gasoline Sales Data

OM, Ch. 1
11Goods,
Forecasting
Services,
and and
Demand
Operations
Planning
Management
©2009 South-Western, a part of Cengage Learning
4
 Amity Business School
Exhibit 11.16 Chart of Sales versus Time

OM, Ch. 1
11Goods,
Forecasting
Services,
and and
Demand
Operations
Planning
Management
©2009 South-Western, a part of Cengage Learning
5
 Amity Business School
Exhibit 11.17 Multiple Regression Results

OM, Ch. 1
11Goods,
Forecasting
Services,
and and
Demand
Operations
Planning
Management
©2009 South-Western, a part of Cengage Learning
6
 Amity Business School
Chapter 11 Forecasting and Demand Planning

Judgmental Forecasting
• When no historical data is available, only
judgmental forecasting is possible.
• The Delphi method consists of forecasting by
expert opinion by gathering judgments and
opinions of key personnel based on their
experience and knowledge of the situation.

OM, Ch. 1
11Goods,
Forecasting
Services,
and and
Demand
Operations
Planning
Management
©2009 South-Western, a part of Cengage Learning
7
 Amity Business School
Chapter 11 Forecasting and Demand Planning

Judgmental Forecasting
• Another common approach to gathering data is a
survey. Sample sizes are usually much larger than
with Delphi, however, and the cost of such surveys
can be high.
• The major reasons for using judgmental methods
are:
 Greater accuracy
 Ability to incorporate unusual or one-time
events
 The difficultly of obtaining the data necessary
OM, Ch. 1
11Goods,
for quantitative techniques
Forecasting
Services,
and and
Demand
Operations
Planning
Management
©2009 South-Western, a part of Cengage Learning
8
 Amity Business School
Chapter 11 Forecasting and Demand Planning

Forecasting in Practice
• Managers use a variety of judgmental and
quantitative forecasting techniques.
• Statistical methods alone cannot account for
such factors as sales promotions, competitive
strategies, unusual economic disturbances, new
products, large one-time orders, natural
disasters, or labor complications.

OM, Ch. 1
11Goods,
Forecasting
Services,
and and
Demand
Operations
Planning
Management
©2009 South-Western, a part of Cengage Learning
9
 Amity Business School
Chapter 11 Forecasting and Demand Planning

Forecasting in Practice
• The first step in developing a practical
forecast is to understand the purpose,
time horizon, and level of aggregation.
• Different forecasting methods require
different levels of technical ability and
understanding of mathematical principles
and assumptions.

OM, Ch. 1
11Goods,
Forecasting
Services,
and and
Demand
Operations
Planning
Management
©2009 South-Western, a part of Cengage Learning
10