Forecasting and estimation techniques - Revision history

Joakimc at 09:32, 12 February 2023

2023-02-12T09:32:16Z

Joakimc: /* Forecasting methods */

2023-02-11T16:54:42Z

Forecasting methods

← Older revision		Revision as of 16:54, 11 February 2023
Line 74:		Line 74:
	= Forecasting methods =		= Forecasting methods =

	~~It can be projected into the future in~~ two ~~ways: through~~ qualitative ~~methods, in which we rely~~ on ~~past actions or on the implicit knowledge~~ of ~~the subject to intuit future actions. Or through~~ quantitative methods~~, in which through the use of statistics or~~ mathematical models, historical data ~~are projected~~ into the future.		When deciding on a forecasting method there are two categories, qualitative and quantitative. The preferred approach depends on what data is available. If historical data consisting of numerical information is available, such as time series data, then '''quantitative methods''' that uses mathematical models to project historical data into the future are preferred. If there exists no historical data appropriate for quantitative forecasting '''qualitative methods''' that rely on judgement and intuition are preferred.

	== Qualitative methods ==		== Qualitative methods ==
Line 131:		Line 131:

	3. Commercial actions of the company. There are certain actions, such as marketing campaigns, sales periods or new store openings, where demand is expected to increase considerably.		3. Commercial actions of the company. There are certain actions, such as marketing campaigns, sales periods or new store openings, where demand is expected to increase considerably.


	= Forecasting problems =		= Forecasting problems =

Joakimc: /* Forecasting process */

2023-02-11T16:34:44Z

Forecasting process

← Older revision		Revision as of 16:34, 11 February 2023
Line 45:		Line 45:

	'''3. Selecting forecasting technique:'''		'''3. Selecting forecasting technique:'''
	It is essential to to identify patterns in the collected data such as points of maximum, seasonality, and cycles. In most cases it will be relevant to visualize the data to identify patterns.		It is essential to to identify patterns in the collected data such as trend, points of maximum, seasonality, and cycles. In most cases it will be relevant to visualize the data to identify patterns.

	'''4. Conduct the forecast:'''		'''4. Conduct the forecast:'''

Joakimc: /* Big Idea */

2023-02-11T16:34:06Z

Big Idea

← Older revision		Revision as of 16:34, 11 February 2023
Line 11:		Line 11:
	Depending on the discipline (business, economics, politics, industry, society, commerce...), the term "forecast" will have one meaning or another. At the level of operations management, forecasting is defined as an approximation to future circumstances through a subjective and objective assessment being different from past data, but taking them as a starting point. The goal of forecasting is to provide insights and support decision-making. Under no circumstances can forecasts be taken as if they were a "crystal ball" capable of seeing the future, since they will always have a percentage of error, depending on how the forecast has been made, as we will see below. This means that forecasts should always be accompanied by a measure of uncertainty <ref name=''book''> ''Operations Management, School of Business Bangladesh Open University. Ziaul Haq Mamun, Ali Ahsan, 2005'' </ref>.		Depending on the discipline (business, economics, politics, industry, society, commerce...), the term "forecast" will have one meaning or another. At the level of operations management, forecasting is defined as an approximation to future circumstances through a subjective and objective assessment being different from past data, but taking them as a starting point. The goal of forecasting is to provide insights and support decision-making. Under no circumstances can forecasts be taken as if they were a "crystal ball" capable of seeing the future, since they will always have a percentage of error, depending on how the forecast has been made, as we will see below. This means that forecasts should always be accompanied by a measure of uncertainty <ref name=''book''> ''Operations Management, School of Business Bangladesh Open University. Ziaul Haq Mamun, Ali Ahsan, 2005'' </ref>.

	Various ~~methods exist for~~ forecasting. The choice of ~~method~~ depends on the characteristics of the data, the nature of the forecasting problem, and the desired level of accuracy. However, there are som key features that are common to all forecasts <ref name="ProductionManagamentbook"> Stevenson, William J., et al. Operations management. Boston: McMcGraw-Hill Irwin, 2007 </ref>:		Various forecasting techniques exists. The choice of technique depends on the characteristics of the data, the nature of the forecasting problem, and the desired level of accuracy. However, there are som key features that are common to all forecasts <ref name="ProductionManagamentbook"> Stevenson, William J., et al. Operations management. Boston: McMcGraw-Hill Irwin, 2007 </ref>:

	1. Forecasts follows the assumption that patterns from the past will, to some extent, remain in the future.		1. Forecasts follows the assumption that patterns from the past will, to some extent, remain in the future.

Joakimc: /* Big Idea */

2023-02-11T16:33:21Z

Big Idea

← Older revision		Revision as of 16:33, 11 February 2023
Line 10:		Line 10:
	= Big Idea =		= Big Idea =
	Depending on the discipline (business, economics, politics, industry, society, commerce...), the term "forecast" will have one meaning or another. At the level of operations management, forecasting is defined as an approximation to future circumstances through a subjective and objective assessment being different from past data, but taking them as a starting point. The goal of forecasting is to provide insights and support decision-making. Under no circumstances can forecasts be taken as if they were a "crystal ball" capable of seeing the future, since they will always have a percentage of error, depending on how the forecast has been made, as we will see below. This means that forecasts should always be accompanied by a measure of uncertainty <ref name=''book''> ''Operations Management, School of Business Bangladesh Open University. Ziaul Haq Mamun, Ali Ahsan, 2005'' </ref>.		Depending on the discipline (business, economics, politics, industry, society, commerce...), the term "forecast" will have one meaning or another. At the level of operations management, forecasting is defined as an approximation to future circumstances through a subjective and objective assessment being different from past data, but taking them as a starting point. The goal of forecasting is to provide insights and support decision-making. Under no circumstances can forecasts be taken as if they were a "crystal ball" capable of seeing the future, since they will always have a percentage of error, depending on how the forecast has been made, as we will see below. This means that forecasts should always be accompanied by a measure of uncertainty <ref name=''book''> ''Operations Management, School of Business Bangladesh Open University. Ziaul Haq Mamun, Ali Ahsan, 2005'' </ref>.


	Various methods exist for forecasting. The choice of method depends on the characteristics of the data, the nature of the forecasting problem, and the desired level of accuracy. However, there are som key features that are common to all forecasts <ref name="ProductionManagamentbook"> Stevenson, William J., et al. Operations management. Boston: McMcGraw-Hill Irwin, 2007 </ref>:		Various methods exist for forecasting. The choice of method depends on the characteristics of the data, the nature of the forecasting problem, and the desired level of accuracy. However, there are som key features that are common to all forecasts <ref name="ProductionManagamentbook"> Stevenson, William J., et al. Operations management. Boston: McMcGraw-Hill Irwin, 2007 </ref>:

Joakimc: /* Big Idea */

2023-02-11T16:33:09Z

Big Idea

← Older revision		Revision as of 16:33, 11 February 2023
Line 12:		Line 12:


	Various methods exist for forecasting~~, which are usually divided into qualitative and quantitative approaches~~. The choice of method depends on the characteristics of the data, the nature of the forecasting problem, and the desired level of accuracy. However, there are som key features that are common to all forecasts <ref name="ProductionManagamentbook"> Stevenson, William J., et al. Operations management. Boston: McMcGraw-Hill Irwin, 2007 </ref>:		Various methods exist for forecasting. The choice of method depends on the characteristics of the data, the nature of the forecasting problem, and the desired level of accuracy. However, there are som key features that are common to all forecasts <ref name="ProductionManagamentbook"> Stevenson, William J., et al. Operations management. Boston: McMcGraw-Hill Irwin, 2007 </ref>:

	1. Forecasts follows the assumption that patterns from the past will, to some extent, remain in the future.		1. Forecasts follows the assumption that patterns from the past will, to some extent, remain in the future.

Joakimc: /* Forecasting process */

2023-02-11T16:28:51Z

Forecasting process

← Older revision		Revision as of 16:28, 11 February 2023
Line 39:		Line 39:
	The forecasting process can be described in the following 5 steps<ref name="ProductionManagamentbook"/>.		The forecasting process can be described in the following 5 steps<ref name="ProductionManagamentbook"/>.

	'''1. Define the objective'''		'''1. Define the objective:'''
	Once the objective of a forecast has been defined, a planning horizon and degree of accuracy must be set (long, medium or short term). For example, to plan the operations of a company dedicated to the manufacture of scooters, it will be necessary to forecast the company's global sales for the coming year, in order to be able to make a detailed plan for the supply of raw materials, production processes, necessary resources or management of logistics for delivery to the customer.		Once the objective of a forecast has been defined, a planning horizon and degree of accuracy must be set (long, medium or short term). For example, to plan the operations of a company dedicated to the manufacture of scooters, it will be necessary to forecast the company's global sales for the coming year, in order to be able to make a detailed plan for the supply of raw materials, production processes, necessary resources or management of logistics for delivery to the customer.

	'''2. Collect data'''		'''2. Collect data:'''
	The main source of data collection is collected and cleaned. The more data that can be collected, the more accurate the forecast will be. Outliers in data are identified and resolved.		The main source of data collection is collected and cleaned. The more data that can be collected, the more accurate the forecast will be. Outliers in data are identified and resolved.

	'''3. Selecting forecasting technique'''		'''3. Selecting forecasting technique:'''
	It is essential to to identify patterns in the collected data such as points of maximum, seasonality, and cycles. In most cases it will be relevant to visualize the data to identify patterns.		It is essential to to identify patterns in the collected data such as points of maximum, seasonality, and cycles. In most cases it will be relevant to visualize the data to identify patterns.

	'''4. Conduct the forecast'''		'''4. Conduct the forecast:'''
	The forecast is conducted with the appropriate forecasting technique.		The forecast is conducted with the appropriate forecasting technique.

	'''5. Validation'''		'''5. Validation:'''
	Forecast accuracy should be evaluated and monitored to conclude if the forecast is performing as intended. In the case that it is not, decisions on forecasting technique, validity of data, and assumption can be revised.		Forecast accuracy should be evaluated and monitored to conclude if the forecast is performing as intended. In the case that it is not, decisions on forecasting technique, validity of data, and assumption can be revised.

Joakimc: /* Forecasting process */

2023-02-11T16:28:15Z

Forecasting process

← Older revision		Revision as of 16:28, 11 February 2023
Line 37:		Line 37:
	== Forecasting process ==		== Forecasting process ==

	The forecasting process can be described in the following 6 steps<ref name="ProductionManagamentbook"/>.		The forecasting process can be described in the following 5 steps<ref name="ProductionManagamentbook"/>.

	'''1. Define the objective.'''		'''1. Define the objective'''
	Once the objective of a forecast has been defined, a planning horizon and degree of accuracy must be set (long, medium or short term). For example, to plan the operations of a company dedicated to the manufacture of scooters, it will be necessary to forecast the company's global sales for the coming year, in order to be able to make a detailed plan for the supply of raw materials, production processes, necessary resources or management of logistics for delivery to the customer.		Once the objective of a forecast has been defined, a planning horizon and degree of accuracy must be set (long, medium or short term). For example, to plan the operations of a company dedicated to the manufacture of scooters, it will be necessary to forecast the company's global sales for the coming year, in order to be able to make a detailed plan for the supply of raw materials, production processes, necessary resources or management of logistics for delivery to the customer.

	'''2. Collect data. '''		'''2. Collect data'''
	The main source of data collection is ~~sales history (last weeks, last months, last years)~~. The ~~longer the sales history~~, the more accurate the ~~forecasts (estimation techniques)~~ will be~~, as history plays a key role~~ in ~~detecting patterns, trends or seasonal periods. To these historical~~ data ~~will be added data provided by sales records/customer surveys, such as demographic references, most influential products or reports of incoming~~ and ~~outgoing stock~~.		The main source of data collection is collected and cleaned. The more data that can be collected, the more accurate the forecast will be. Outliers in data are identified and resolved.

	'''3. ~~Validation and exploration analysis of the data collected.~~'''		'''3. Selecting forecasting technique'''
	It is essential to ~~graphically represent the historical demand obtained, in order~~ to identify points of maximum ~~or minimum demand~~, ~~seasonal patterns or repetitive~~ cycles ~~of market demand~~. On the ~~other hand, if~~ data ~~validation is~~ to be performed by different areas of the company, the production department should confirm that enough units were manufactured to support the collected sales, or the marketing department should analyze whether the peak sales points coincide with the times when intensive marketing campaigns were carried out.		It is essential to to identify patterns in the collected data such as points of maximum, seasonality, and cycles. In most cases it will be relevant to visualize the data to identify patterns.

	'''4. ~~Choose~~ the ~~appropriate forecasting method and launch forecasts.~~ '''		'''4. Conduct the forecast'''
	~~Depending on the degree of accuracy desired, the resources and data available, qualitative or quantitative forecasts will be launched,~~ with ~~a given forecast horizon. Once these preliminary steps have been carried out,~~ the ~~desired forecasts will be launched~~.		The forecast is conducted with the appropriate forecasting technique.

	'''5. ~~Validate the forecasts obtained.~~'''		'''5. Validation'''
	~~Once the results have been obtained, all departments involved~~ should ~~verify that the data obtained are valid. Once this process has been completed, planning will~~ be ~~carried out based on~~ the ~~new forecasts~~. In ~~other words~~, ~~plan how to achieve the desired results. This planning~~, ~~as mentioned above~~, ~~will vary depending on the market in which the company is located~~ and ~~the type of industry in which it operates~~.		Forecast accuracy should be evaluated and monitored to conclude if the forecast is performing as intended. In the case that it is not, decisions on forecasting technique, validity of data, and assumption can be revised.

	== Elements of a successful forecast ==		== Elements of a successful forecast ==

Joakimc at 16:14, 11 February 2023

2023-02-11T16:14:50Z

← Older revision		Revision as of 16:14, 11 February 2023
Line 12:		Line 12:


	Various methods exist for forecasting, which are usually divided into qualitative and quantitative approaches. The choice of method depends on the characteristics of the data, the nature of the forecasting problem, and the desired level of accuracy. However, there are som key features that are common to all forecasts <ref name=''ProductionManagamentbook''> Stevenson, William J., et al. Operations management. Boston: McMcGraw-Hill Irwin, 2007 </ref>:		Various methods exist for forecasting, which are usually divided into qualitative and quantitative approaches. The choice of method depends on the characteristics of the data, the nature of the forecasting problem, and the desired level of accuracy. However, there are som key features that are common to all forecasts <ref name="ProductionManagamentbook"> Stevenson, William J., et al. Operations management. Boston: McMcGraw-Hill Irwin, 2007 </ref>:

	1. Forecasts follows the assumption that patterns from the past will, to some extent, remain in the future.		1. Forecasts follows the assumption that patterns from the past will, to some extent, remain in the future.

Joakimc: /* Forecasting process */

2023-02-11T16:14:04Z

Forecasting process

← Older revision		Revision as of 16:14, 11 February 2023
Line 37:		Line 37:
	== Forecasting process ==		== Forecasting process ==

	The forecasting process can be described in the following 6 steps<ref name=''ProductionManagamentbook''/>.		The forecasting process can be described in the following 6 steps<ref name="ProductionManagamentbook"/>.

	'''1. Define the objective.'''		'''1. Define the objective.'''