3-1Forecasting McGraw-Hill/Irwin FORECAST:  A statement about the future value of a variable of interest such as resource requirements, capacity planning, Supply Chain Management (SCM) and product or service demand.  Forecasts affect decisions and activities throughout an organization  Accounting, finance  Human resources  Marketing  MIS  Operations  Product / service design

3-2Forecasting Introduction 1. Forecasting in business forms the basis for budgeting and planning for capacity, sales, inventory, manpower, purchasing and more.

3-3Forecasting Applications of forecasting  Plan or design the system.  Planning to make use of the system.

3-4Forecasting Introduction  Planning the use of the system relates to short range and intermediate range planning which means planning inventory workforce resources, planning of purchasing and production activities, budgeting and scheduling etc.

3-5Forecasting Introduction  Business Forecasting is more than Predicting demand. Forecasting is also used to predict profits, revenues, costs, productivity changes.  Movements of key economic indicators ( GNP, inflation and government loans) and prices of stocks and bonds.

3-6Forecasting FORECAST:  A statement about the future value of a variable of interest such as resource requirements, capacity planning, SCM and product or service demand.  Forecasts affect decisions and activities throughout an organization  Accounting, finance  Human resources  Marketing  MIS  Operations  Product / service design FORECAST:

3-7Forecasting AccountingCost/profit estimates FinanceCash flow and funding Human ResourcesHiring/recruiting/training MarketingPricing, promotion, strategy MISIT/IS systems, services OperationsSchedules, MRP, workloads Product/service designNew products and services Applications of Forecasts

3-8Forecasting Web-Based Forecasting: CPFR De fined  Collaborative Planning, Forecasting, and Replenishment (CPFR) a Web-based tool used to coordinate demand forecasting, production and purchase planning, and inventory replenishment between supply chain trading partners.

3-9Forecasting Web-Based Forecasting: Steps in CPFR  1. Creation of a front-end partnership agreement  2. Joint business planning  3. Development of demand forecasts  4. Sharing forecasts  5. Inventory replenishment

3-10Forecasting 1. Assumes causal system( That same system that existed in the past will exist in future. 2. Forecasts rarely perfect because of RANDOMNESS (having no specific pattern). Allowances should be made for inaccuracies. 4 Each Common characteristics of all forecasts

3-11Forecasting 3. Forecasts more accurate for groups vs. individuals naturally because forecasting errors in a group tend to cancel out forecasting errors for individuals. 4. Forecast accuracy decreases as time horizon increases indicating it is safe to make short range forecasts instead of long term forecasts. If you can recall we had talked about Flexible and Agile Corporations in the past. 4 Each Common characteristics of all forecasts