DEMAND FORECASTING -
JUDGEMENTAL METHOD
WHAT IS FORECASTING?
- Demand forecasts = the estimate of expected demand during a
specified future period, could be sales or price, growth forecast as
well
® Essentially a calculated guess for the future
® It is basic inputs for many kinds of decisions in
organizations
® Important for all managers to be able to understand
and use demand forecasts
- Primary goal for operation management
® To match supply and demand
® Having a forecast of demand is essential for
determining how much capacity or supply will be
needed to meet demand
◊ To make staffing and equipment decisions
◊ Prepare budgets
◊ Ordering from suppliers and supply chain
partners need to make their plans
® Involves modelling the past pattern of demand for an
item and projecting it into the future while taking new
developments into account
WHY FORECASTING?
- Because planning is an integral part of managers job and planning
involves a lot of uncertainty
- Demand forecasts help through reducing certainty thus develop
more meaningful plans
, WHY FORECASTING?
- Because planning is an integral part of managers job and planning
involves a lot of uncertainty
- Demand forecasts help through reducing certainty thus develop
more meaningful plans
- Without future info plans are likely to fail
- Intelligent estimate is better than no estimate
make these forecasts;
- Ppl take into account 2 kinds of info
1. Current factors or conditions
2. Past experience in a similar situation
- Businesses make plans for future operations based on anticipated
future demand
- Anticipated demand
® Comes from actual customer orders
} Planning = straightforward, almost no
forecasting needed
® and forecasts
} For most businesses
THREE USES FOR DEMAND FORECASTING IN OPERATIONS;
1. Help managers design the system
- Involves LONG TERM PLANS about which goods ands
ervices to offer
} Forecast to open a new distribution centre
} Which capacities
} What equipment to have
} Where to locate
2. Help them plan medium term use of the system
- involves tasks such as planning overall inventory and
workforce levels, and planning production at the
aggregate product family level
JUDGEMENTAL METHOD
WHAT IS FORECASTING?
- Demand forecasts = the estimate of expected demand during a
specified future period, could be sales or price, growth forecast as
well
® Essentially a calculated guess for the future
® It is basic inputs for many kinds of decisions in
organizations
® Important for all managers to be able to understand
and use demand forecasts
- Primary goal for operation management
® To match supply and demand
® Having a forecast of demand is essential for
determining how much capacity or supply will be
needed to meet demand
◊ To make staffing and equipment decisions
◊ Prepare budgets
◊ Ordering from suppliers and supply chain
partners need to make their plans
® Involves modelling the past pattern of demand for an
item and projecting it into the future while taking new
developments into account
WHY FORECASTING?
- Because planning is an integral part of managers job and planning
involves a lot of uncertainty
- Demand forecasts help through reducing certainty thus develop
more meaningful plans
, WHY FORECASTING?
- Because planning is an integral part of managers job and planning
involves a lot of uncertainty
- Demand forecasts help through reducing certainty thus develop
more meaningful plans
- Without future info plans are likely to fail
- Intelligent estimate is better than no estimate
make these forecasts;
- Ppl take into account 2 kinds of info
1. Current factors or conditions
2. Past experience in a similar situation
- Businesses make plans for future operations based on anticipated
future demand
- Anticipated demand
® Comes from actual customer orders
} Planning = straightforward, almost no
forecasting needed
® and forecasts
} For most businesses
THREE USES FOR DEMAND FORECASTING IN OPERATIONS;
1. Help managers design the system
- Involves LONG TERM PLANS about which goods ands
ervices to offer
} Forecast to open a new distribution centre
} Which capacities
} What equipment to have
} Where to locate
2. Help them plan medium term use of the system
- involves tasks such as planning overall inventory and
workforce levels, and planning production at the
aggregate product family level
