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Sem 5 Prep
← OperationsForecasting: what and why

Formulas for this chapter

Naive forecast

F(t) = A(t-1)

As a zero-cost benchmark, and when the series has no trend or seasonality worth modelling. Every other method must beat it to justify itself.

F(t)
Forecast for period t
A(t-1)
Actual demand in the most recent period

Forecast error

Error = Actual - Forecast

Step 6 of the process, every period. Keep the sign in the table; drop it only when computing absolute measures.

Actual
Demand that actually occurred in the period
Forecast
What was predicted for that period, before it happened
Step 2 of 23
The real wordsTheory

What a forecast is

ForecastA statement about the future value of a variable of interest, such as demand.

The purpose of demand management is to coordinate and control all sources of demand, so the productive system can be used efficiently and the product delivered on time.

Forecasts affect decisions throughout the organisation: marketing and sales, operations, accounting and finance, human resources.

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