2. FORECASTING
 Forecasting is essential for a number of planning
decisions.
 Long term decisions
New product introduction
Plant expansion

3. MEDIUM TERM DECISIONS
 Aggregate production planning
 Man power planning
 Inventory policy
SHORT TERM DECISIONS:
• Production planning
• Scheduling of job orders

4. PLANNING PROCESS
 A forecast of demand is an essential input for
planning.
System to be
managed
System
objective
s
Plan of
action
Constraints
budget/space
Resources
Men/materials
Demand forecast

5. METHODS OF FORECASTING
(A) subjective or intuitive methods
-opinion polls, interviews
-Delphi
(B) Methods based on averaging of past data
-moving averages
-exponential smoothing

6. (C) Regression models on historical data
-trend extrapolation
(D) Causal or economic models
(E) time- series analysis using stochastic models
- Box Jenkins Models

7. FORECASTING
 Objective
 Scientific
 Free from ‘bias’
 Reproducible
 Error analysis possible
PREDICTION
 Subjective
 Intuitive
 Individual bias
 Non reproducible
 Error analysis limited

8. NORMAL PATTERNS OF DEMAND
 Constant
 Linear trend
 Cyclic
 Seasonal pattern with growth

9. ABNORMAL DEMAND PATTERNS
Transient impulse sudden rise sudden fall

10. OPINION POLLS
 Personal interviews
Eg: aggregation of opinion of sales representatives to obtain sales
forecast of a region.
 Knowledge base (experience)
 Subjective bias
 Questionnaire method
 Questionnaire design
 Choice of respondents
 Obtaining respondents
 Analysis and presentation of results (forecasting)
 Telephonic conversation
 Fast
 DELPHI

11. DELPHI
 A structured method of obtaining responses from
experts
 Utilizes the vast knowledge base of experts
 Eliminates subjective bias and ‘influencing’ the
members through anonymity
 Iterative in character with statistical summary at end
of each round (generally 3 rounds)
 Consensus (or divergent view points) usually emerge at
the end of the exercise.

12. DELPHI
Coordinator
mean
median
standard deviatiom
1990 1995 2000 2005 2010
year
Exp
ert 1
Exp
ert 2
Exp
ert n

13. DELPHI
 ROUND 1
 ROUND 2
 ROUND 3

14. DELPHI-moving to divergent points
 Round 1
 Round 2
 Round 3