Forecasting in operation management pdf

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Forecasting in operation management pdf

For an organization to provide customer delight it is important that organization can understand what customer wants and how much does they want.

If an organization can gauge future demand that manufacturing plan becomes simpler and cost effective. The process of analyzing and understanding current and past information to understand the future patterns through a scientific and systemic approach is called forecasting.

And the process of estimating the future demand of product in terms of a unit or monetary value is referred to as demand forecasting. The purpose of forecasting is to help the organization manage the present as to prepare for the future by examining the most probable future demand pattern. However, forecasting has its constraint for example we cannot estimate a pattern for technologies and product where there are no existing pattern or data.

The very objective of business forecasting is to be accurate as possible, so that planning of resources can be done in a very economical manner and therefore, propagate optimum utilization of resources. Business forecasting helps in establishing relationship among many variables, which go into manufacturing of the product. Each forecast situation must be analyzed independently along with forecasting method. Business forecasting has many dimensions and varieties depending upon the utility and application.

The three basic forms are as follows:. Economic Forecasting: these forecasting are related to the broader macro-economic and micro-economic factors prevailing in the current business environment. It includes forecasting of inflation rate, interest rate, GDP, etc. Demand Forecast: organization conduct analysis on its pre-existing database or conduct market survey as to understand and predict future demands. Operational planning is done based on demand forecasting.

Technology Forecast: this type of forecast is used to forecast future technology upgradation. A forecast and its conclusion are valid within specific time frame or horizon. These time horizons are categorized as follows:. Long Term Forecast: This type of forecast is made for a time frame of more than three years. These types of forecast are utilized for long-term strategic planning in terms of capacity planning, expansion planning, etc.

Mid-Term Forecast: This type of forecast is made for a time frame from three months to three years. These types of forecasts are utilized production and layout planning, sales and marketing planning, cash budget planning and capital budget planning. Short Term Forecast: This type of forecast is made of a time frame from one day to three months.

These types of forecasts are utilized for day to day production planning, inventory planning, workforce application planning, etc.Chapter 3: Forecasting Definition: Forecasting is a statement about the future.

It is estimating future event variableby casting forward past data. Past data are systematically combined in predetermined way to obtain the estimate. Forecasting is not guessing or prediction. Common features of forecasting: 1. Forecasting is rarely perfect deviation is expected. Forecasting for a group of items is more accurate than the forecast for individuals. Forecasting accuracy increases as time horizon increases.

Elements of good forecast: 1. Timely: Forecasting horizon must cover the time necessary to implement possible changes.

Operations Management: An Integrated Approach, 5th Edition by R. Dan Reid, Nada R. Sanders

Reliable: It should work consistently. Accurate: Degree of accuracy should be stated. Meaningful: Should be expressed in meaningful units. Financial planners should know how many dollars needed, production should know how many units to be produced, and schedulers need to know what machines and skills will be required.

Written: to guarantee use of the same information and to make easier comparison to actual results. Easy to use: users should be comfortable working with forecast.

Steps in forecast development: 1. Determine purpose of forecast. Establish a time horizon: time limit, accuracy decreases with shorter durations. Select forecasting technique. Gather and analyze data. Prepare the forecast 6.To browse Academia.

The Importance of Forecasting in the Operations of Modern Management

Skip to main content. Log In Sign Up. Forecasting in Operations Management. Swati Sharma. For comments: ehabmes yahoo. It is estimating future event variableby casting forward past data. Past data are systematically combined in predetermined way to obtain the estimate. Forecasting is not guessing or prediction. Forecasting is rarely perfect deviation is expected. Forecasting for a group of items is more accurate than the forecast for individuals. Forecasting accuracy increases as time horizon increases.

Elements of good forecast: 1. Timely: Forecasting horizon must cover the time necessary to implement possible changes.

Lecture - 34 Forecasting

Reliable: It should work consistently. Accurate: Degree of accuracy should be stated. Meaningful: Should be expressed in meaningful units. Financial planners should know how many dollars needed, production should know how many units to be produced, and schedulers need to know what machines and skills will be required.

Written: to guarantee use of the same information and to make easier comparison to actual results. Easy to use: users should be comfortable working with forecast. Determine purpose of forecast.Time Time a Trend b Cycle. Identify the 2. Collect historical 3. Plot data and identify purpose of forecast data patterns. Check forecast 5. Select a forecast accuracy with one or forecast for period of model that seems more measures historical data appropriate for data. Is accuracy of No 8b. Select new forecast forecast model or acceptable?

Adjust forecast based Monitor results 8a. D1 Learn more about Scribd Membership Home. Read Free For 30 Days. Much more than documents. Discover everything Scribd has to offer, including books and audiobooks from major publishers. Start Free Trial Cancel anytime. Forecasting in Operation Management. Uploaded by Hassan Hamed. Document Information click to expand document information Date uploaded Nov 23, Did you find this document useful? Is this content inappropriate? Report this Document.

Flag for inappropriate content. Download Now. Related titles. Carousel Previous Carousel Next. Jump to Page.Chapter 3: Forecasting Definition: Forecasting is a statement about the future.

It is estimating future event variableby casting forward past data. Past data are systematically combined in predetermined way to obtain the estimate. Forecasting is not guessing or prediction. Common features of forecasting: 1. Forecasting is rarely perfect deviation is expected.

forecasting in operation management pdf

Forecasting for a group of items is more accurate than the forecast for individuals. Forecasting accuracy increases as time horizon increases. Elements of good forecast: 1. Timely: Forecasting horizon must cover the time necessary to implement possible changes. Reliable: It should work consistently.

Accurate: Degree of accuracy should be stated. Meaningful: Should be expressed in meaningful units. Financial planners should know how many dollars needed, production should know how many units to be produced, and schedulers need to know what machines and skills will be required.

Written: to guarantee use of the same information and to make easier comparison to actual results. Easy to use: users should be comfortable working with forecast. Steps in forecast development: 1. Determine purpose of forecast. Establish a time horizon: time limit, accuracy decreases with shorter durations.

Select forecasting technique. Gather and analyze data. Prepare the forecast 6. Monitor forecast. Methods of forecast: 1. Quantitative based on time series data : Time series data: a time ordered sequence of observation taken at regular intervals over time. Patterns resulting from plotting of these data are: a.

Operations Management: An Integrated Approach, 5th Edition by R. Dan Reid, Nada R. Sanders

Trend: A long-term upward or downward movement in data. Seasonality: Short-term regular variations related to calendar or time of day.

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Cycle: Wavelike variation lasting more than one year. Random variations: residual variations after all other behaviors are accounted for. Irregular variations: caused by irregular circumstances, not reflective of typical behavior. Q: is the increased accuracy of another method worth the additional cost? Examples: 1. Sales of air conditioning units next July, will be the same as the sales in last July.

Seasonal 2. Highway traffic next Tuesday will be the same as last Tuesday stable, moving around average. If the last 2 actual values were 50 and 53, the next will be 56 trend.Making good estimates is the main purpose of forecasting.

forecasting in operation management pdf

Every day, operations managers make decisions with uncertain outcomes. No one can see the future to know what sales will be, what will break, what new equipment will be needed, or what investments will yield. Yet those decisions need to be made and executed to move the firm forward. Forecasting is the art and science of predicting what will happen in the future. Sometimes that is determined by a mathematical method; sometimes it is based on the intuition of the operations manager.

Most forecasts and end decisions are a combination of both. Forecasting is conducted by what are referred to as time horizons. Short range forecast. While it can be up to one year, this forecast is usually used for three months or less.

It is used for planning purchases, hiring, job assignments, production levels, and the like. Medium range forecast. This is generally three months to three years.

Medium range forecasts are used for sales and production planning, budgeting, and analysis of different operating plans. Long range forecast. Generally three years or more in time span, it is used for new products, capital expenditures, facility expansion, relocation, and research and development. Medium and long range forecasts differ from short range forecasts by other characteristics as well.

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Medium and long range forecasts are more comprehensive in nature. They support and guide management decisions in planning products, processes, and plants. A new plant can take seven or eight years from the time it is thought of, until it is ready to move into and become functional. Short term forecasts use different methodologies than the others.Read this article to learn about Forecasting in an Organisation.

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After reading this article you will learn about:- 1. Meaning of Forecasting 2. Role of Forecasting 3. Steps 4. In preparing plans for the future, the management authority has to make some predictions about what is likely to happen in the future. It shows that the managers know something of future happenings even before things actually happen. Forecasting provides them this knowledge.

Forecasting is the process of estimating the relevant events of future, based on the analysis of their past and present behaviour.

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The future cannot be probed unless one knows how the events have occurred in the past and how they are occurring presently. The past and present analysis of events provides the base helpful for collecting information about their future occurrence. Thus, forecasting may be defined as the process of assessing the future normally using calculations and projections that take account of the past performance, current trends, and anticipated changes in the foreseeable period ahead.

Whenever the managers plan business operations and organisational set-up for the years ahead, they have to take into account the past, the present and the prevailing economic, political and social conditions. Forecasting provides a logical basis for determining in advance the nature of future business operations and the basis for managerial decisions about the material, personnel and other requirements.

It is, thus, the basis of planning, when a business enterprise makes an attempt to look into the future in a systematic and concentrated way, it may discover certain aspects of its operations requiring special attention.

However, it must be recognised that the process of forecasting involves an element of guesswork and the managers cannot stay satisfied and relaxed after having prepared a forecast.

forecasting in operation management pdf

The forecast will have to be constantly monitored and revised—particularly when it relates to a long- term period. The managers should try to reduce the element of guesswork in preparing forecasts by collecting the relevant data using the scientific techniques of analysis and inference.

It defines the probability of happening of future events. Therefore, the happening of future events can be precise only to a certain extent.


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