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OPC Module2.1.1

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6 views

OPC Module2.1.1

Opc

Uploaded by

Jayesh Borse
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Module 2

Forecasting

Prasad Bari
Forecasting
Forecasting
It is the projection based on the past data.

It is defined as an estimate of sales in physical units or monetary value for


a specified future period under proposed marketing plan and under the
assumed set of economic and forces outside the organisation for which the
forecast is made.
Forecasting
Forecasting & Prediction
Prediction is an estimate of future event through subjective
consideration other than just the past data. For prediction, a good
subjective estimation is based on manager’s skill, experience and
judgement.
Prediction is less accurate and has low reliability as it has an
influence of one’s own perception and bias.

On the other hand, forecasting is based on the historical data and


it requires statistical management science techniques.
Forecasting
Need for Forecasting
1) New facility planning
2) Production planning
3) Workforce scheduling
4) Financial planning
5) Material planning
Forecasting
Classification of Forecasting Methods
 Qualitative or subjective methods (Judgemental techniques)
• Opinion survey method
• Executive opinion method
• Customer and distributors surveys
• Marketing trials
• Delphi Technique
Forecasting
Classification of Forecasting Methods
 Quantitative or objective methods
This method uses past historical data

Time series method


i) Naive approach
ii) Moving average method
iii) Exponential smoothing method

Causal Models
i) Trend projection
ii) Linear regression analysis
Forecasting
Least Square Method (Regression Analysis)
 It is a mathematical model of obtaining the line of best fit between
the dependent variable (demand) and independent variable (time
period)
 In a simple regression analysis, the relationship between the
dependent variable y and independent variable x can be represented
by a straight line, y = a + b x
 Where, b is the slope of the line and a is the y intercept
 The values of the constant a and b are determined by the two
simultaneous equations.
Forecasting
𝛴𝑦 = 𝑛𝑎 + 𝑏𝛴𝑥 ……(1)
𝛴𝑥𝑦 = 𝑎𝛴𝑥 + 𝑏𝛴𝑥 2 ……(2)
Substituting the value of 𝛴𝑥 = 0 in equation (1) & (2)
𝑎 = 𝛴𝑦/𝑛
𝑏 = 𝛴𝑥𝑦/𝛴𝑥 2
Forecasting
Forecasting
Forecasting
Forecasting
Forecasting
Forecasting
Forecasting
Forecasting
Forecasting
Moving Average Forecasting
It is a statistical method to establish and extrapolate trend of past
sales.

This method discards old figures as new ones come in i.e. fresh
average is computed at the end of each period by adding the demand
of the most recent period and omitting the demand of the oldest
period.

Since the data used in this method changes from period to period
hence it is called moving average method.
Forecasting
The consumption rate of a particular item over the past 6 months is as
follows.

Month Jan Feb Mar Apr May June


Consumption 400 350 450 420 460 380

Compute the forecast for the month of July.


Solution:-
The average 410 can be used as forecast for the month of July.
Forecasting
The past data of the load on a machine is given in the table below
i) Compute the load on the machine using the 5th moving average for
the month of December.
ii) Compute a weighted 3 months moving average for December where
the weights are 0.5, 0.3 and 0.2 for the month of November, October
and September respectively.
Month June July Aug Sept Oct Nov
Load (Hrs.) 585 610 675 750 860 970

Solution:-
i) (970+860+750+675+610) / 5 = 773 Hrs.
ii) (970*0.5) + (860*0.3) + (750*0.2) = 893 Hrs.

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