1. MBA7020_05.ppt/June 27, 2005/Page 1 Georgia State University - Confidential MBA 7020 Business Analysis Foundations Time Series Forecasting June 27, 2005

2. MBA7020_05.ppt/June 27, 2005/Page 2 Georgia State University - Confidential Agenda Qualitative Forecasting Models Quantitative Forecasting Models Forecasting

3. MBA7020_05.ppt/June 27, 2005/Page 3 Georgia State University - Confidential Eight Steps to Forecasting Determine the use of the forecast  What objective are we trying to obtain? Select the items or quantities that are to be forecasted. Determine the time horizon of the forecast.  Short time horizon – 1 to 30 days  Medium time horizon – 1 to 12 months  Long time horizon – more than 1 year Select the forecasting model or models Gather the data to make the forecast. Validate the forecasting model Make the forecast Implement the results

4. MBA7020_05.ppt/June 27, 2005/Page 4 Georgia State University - Confidential Model Differences Qualitative (ex: Delphi) – incorporates judgmental & subjective factors into forecast. Quantitative (ex: Time-Series) – attempts to predict the future by using historical data. Causal – incorporates factors that may influence the quantity being forecasted into the model

5. MBA7020_05.ppt/June 27, 2005/Page 5 Georgia State University - Confidential Agenda Qualitative Forecasting Models Quantitative Forecasting Models Forecasting

6. MBA7020_05.ppt/June 27, 2005/Page 6 Georgia State University - Confidential Qualitative Forecasting Models Delphi method Iterative group process allows experts to make forecasts Participants:  decision makers: 5 -10 experts who make the forecast  staff personnel: assist by preparing, distributing, collecting, and summarizing a series of questionnaires and survey results  respondents: group with valued judgments who provide input to decision makers

7. MBA7020_05.ppt/June 27, 2005/Page 7 Georgia State University - Confidential Qualitative Forecasting Models Jury of executive opinion Opinions of a small group of high level managers, often in combination with statistical models. Result is a group estimate. Sales force composite Each salesperson estimates sales in his region. Forecasts are reviewed to ensure realistic. Combined at higher levels to reach an overall forecast. Consumer market survey Solicits input from customers and potential customers regarding future purchases. Used for forecasts and product design & planning

8. MBA7020_05.ppt/June 27, 2005/Page 8 Georgia State University - Confidential Agenda Qualitative Forecasting Models Quantitative Forecasting Models Forecasting

9. MBA7020_05.ppt/June 27, 2005/Page 9 Georgia State University - Confidential Time Series Forecasting Process Look at the data (Scatter Plot) Forecast using one or more techniques Evaluate the technique and pick the best one. Look  Forecast  Evaluate Look at data – Graph it! Forecast using appropriate method, based on best possible fit Evaluate using indicators (Bias, MAD, MAPE, MSE, Std Error, R2) Use indicators to evaluate model