Process of projecting values of one or more variables into the future
Forecasting
Integrate marketing, inventory, sales, operations planning, and financial data
Demand Planning Modules
Length of time on which a forecast is based
●Spans from short-range forecasts of under 3 months to long-range
forecasts of 1 to 10 years
Planning horizon
2 Forecast of Planning Horizon
• Planning horizon
• Time bucket
Unit of measure for the time period used in a forecast
Time bucket
Data Patterns:
Set of observations measured at successive points in time
or over successive periods of time
Time series
5 Characteristics of Data Pattern in Time Series
• Trend
• Seasonal Patterns
• Cyclical patterns
• Random variation (noise)
• Irregular variation
Underlying pattern of growth or decline in a time series
Trend
Characterized by
repeatable periods of ups and downs
over short periods of time
Seasonal patterns
Regular patterns in a
data series that take place over long
periods of time
Cyclical patterns
Unexplained
deviation of a time series from a
predictable pattern
Random variation (noise)
One-time variation that
is explainable
Irregular variation
Based on the assumption that the future will be an extrapolation of the
past
Statistical Forecasting
Helps find the best-fitting regression model for a time series
Excel’s Add Trendline Option
● Works with more than one independent variable
● Incorporates time and other causal variables
Multiple Linear Regression Model
Relies upon opinions and expertise of people in developing forecasts
Judgmental Forecasting
Judgmental Forecasting Approaches
_____ Asking those who are close to the end consumer about the customers’ purchasing plans
Grassroots forecasting
What Method?
Forecasting by expert opinion by
gathering judgments and opinions of key personnel based on their experience and knowledge
Delphi method
Helps build a statistical model that defines a relationship between a dependent variable and one or more independent variables.
Regression Analysis
