this is the third chapter for operation and mangement

1. William J. Stevenson Operations Management 8 th edition

2. CHAPTER 3 Forecasting McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

4. Uses of Forecasts New products and services Product/service design Schedules, MRP, workloads Operations IT/IS systems, services MIS Pricing, promotion, strategy Marketing Hiring/recruiting/training Human Resources Cash flow and funding Finance Cost/profit estimates Accounting

6. Elements of a Good Forecast Timely Accurate Reliable Meaningful Written Easy to use

7. Steps in the Forecasting Process Step 1 Determine purpose of forecast Step 2 Establish a time horizon Step 3 Select a forecasting technique Step 4 Gather and analyze data Step 5 Prepare the forecast Step 6 Monitor the forecast “ The forecast”

11. Forecast Variations Trend Irregular variation Seasonal variations 90 89 88 Figure 3.1 Cycles

12. Naive Forecasts The forecast for any period equals the previous period’s actual value. Uh, give me a minute.... We sold 250 wheels last week.... Now, next week we should sell....

17. Simple Moving Average Actual MA3 MA5 MA n = n A i i = 1  n

20. Example 3 - Exponential Smoothing

21. Picking a Smoothing Constant  .1  .4 Actual

22. Common Nonlinear Trends Figure 3.5 Parabolic Exponential Growth

24. Calculating a and b b = n (ty) - t y n t 2 - ( t) 2 a = y - b t n       

25. Linear Trend Equation Example

26. Linear Trend Calculation y = 143.5 + 6.3t a = 812 - 6.3(15) 5 = b = 5 (2499) - 15(812) 5(55) - 225 = 12495 - 12180 275 - 225 = 6.3 143.5

28. Linear Model Seems Reasonable A straight line is fitted to a set of sample points. Computed relationship

30. MAD, MSE, and MAPE MAD = Actual forecast   n MSE = Actual forecast ) - 1 2   n ( MAPE = Actual forecast  n / Actual*100) 

31. Example 10

36. Exponential Smoothing

37. Linear Trend Equation

38. Simple Linear Regression