March 24, 2011 Dr. Sylvia Stokes Professor of Contract Mgt DAU South Region [email protected].
LUNCH & LEARN - dau.mil · PDF fileDemand Forecasting: Is the process of making predictions of...
32
Transcript of LUNCH & LEARN - dau.mil · PDF fileDemand Forecasting: Is the process of making predictions of...
LUNCH & LEARN
DEMAND FORECASTING
Dr. Andre [email protected]
mailto:[email protected]
DEMAND FORECASTING
Demands & Forecasts
Forecasting Models
Demand Forecasting: Is the process of making predictions of the future based on past and present data and analysis of trends for a product or service
Demand Management: Includes demand planning, prioritizing and management
DEFINITIONS
Forecast Types
Qualitative
Quantitative
Demand Types
Independent
Dependent
DEMANDS AND FORECASTS
Demand for an end item
Forecasted
Examples:
Uniforms
Tail hook
INDEPENDENT DEMAND
Demand for assemblies, components, or ingredients necessary to make an end item
Calculated based upon Independent Demand
Examples:
Ferrirum M54, C64 steel
Wheel, tire, nut
DEPENDENT DEMAND
Forecast Types
Qualitative
Quantitative
Demand Types
Independent
Dependent
DEMANDS AND FORECASTS
Qualitative Forecasting: When there is little historical data to rely on, such as when establishing sparing for a completely new and unique item, and intuition or expert judgement is required
DEFINITIONS
Subjective prediction of demand Often used in absence of historical data May use mathematical modeling
May include: Expert judgment Delphi method
(panel of SMEs)
QUALITATIVE FORECAST
QUALITATIVE METHODSGrass Roots: Deriving future demand by asking end-user or an organization closest to the end-user
Market Research: Attempting to identify end-user patterns, emerging trends, and new products for support
Panel Consensus: Deriving future estimations from the synergy of a panel of experts in subject area
Delphi Method: Similar to Panel Consensus but with anonymity
Historical Analogy: Identify another similar commodity to the one being forecasted.
Quantitative Forecasting: When historical data exists and is helpful in calculating future demand or forecasting based on numbers
DEFINITIONS
QUANTITATIVE FORECAST
Predicts demand based upon historical data Often uses math models
Examples of math models Moving Average Exponential Smoothing
QUANTITATIVE METHODSTime Series: Models that predict future demand based on past history
Causal Relationships: Models that use statistical techniques to establish relationships between demand and various outside factors
Simulation: Models that can incorporate some randomness and non-linear effects
DEMAND FORECASTING
Demands & Forecasts
Forecasting Models
3 Months of Demand Data
Highest Demand = 15Lowest Demand = 10 Average Demand ~ 12
Period 1 2 3 4 5 6 7 8 9 10
Forecast
Demand 10 10 15 20 15 10 15 20 25 10
Forecast
Period 12345678910
Forecast
Demand10101520151015202510
3-Moving Average forecasts based on previous 3 months of data
Period 12345678910
Quarterly Moving Average12151715131520
Historical Demand10101520151015202510
4-Month Moving Average forecasts based on previous 4 months of data
Period 12345678910
4-Month Moving Average141515151518
Historical Demand10101520151015202510
6-Month Moving Average forecasts based on previous 6 months of data
Period 12345678910
6-Month Moving Average13141618
Historical Demand10101520151015202510
Forecast for future 8 months using exponential smoothing and alpha factor () = 0.3Ft+1 = Dt + (1 )Ft
Period PreviousCurrent 12345678
Forecast15181615171614151619
Actual Demand10101520151015202510
Forecast for future 8 months using exponential smoothing and alpha factor () = 0.6
Period PreviousCurrent 12345678
Forecast15181314181612141822
Actual Demand10101520151015202510
10 Months of Demand Data
Highest Demand = 25Lowest Demand = 10 Average Demand = 15
Period 1 2 3 4 5 6 7 8 9 10
Forecast
Demand 10 10 15 20 15 10 15 20 25 10
Forecast
Period 12345678910
Forecast
Demand10101520151015202510
3-Moving Average forecasts based on previous 3 months of data
Period 12345678910
Quarterly Moving Average12151715131520
Historical Demand10101520151015202510
4-Month Moving Average forecasts based on previous 4 months of data
Period 12345678910
4-Month Moving Average141515151518
Historical Demand10101520151015202510
6-Month Moving Average forecasts based on previous 6 months of data
Period 12345678910
6-Month Moving Average13141618
Historical Demand10101520151015202510
Forecast for future 8 months using exponential smoothing and alpha factor () = 0.3Ft+1 = Dt + (1 )Ft
Period PreviousCurrent 12345678
Forecast15181615171614151619
Actual Demand10101520151015202510
Forecast for future 8 months using exponential smoothing and alpha factor () = 0.6
Period PreviousCurrent 12345678
Forecast15181314181612141822
Actual Demand10101520151015202510
FORECAST MODELSMoving Average Forecast: Predicts future need based upon a rolling average of historical data
Weighted Moving Average Forecast: Predicts future need based upon weighted historical data Applies factor to historical period to weight future
anticipated demand
FORECASTING MODELS
3-Week Moving Average formulaFt+1 = (Dt-2 + Dt-1 + Dt-0)/3
Moving Average Forecast Model
3-Moving Average forecasts based on previous 3 months of data
Period 1 2 3 4 5 6 7 8 9 10Quarterly Moving Average
12 15 17 15 13 15 20
Historical Demand
10 10 15 20 15 10 15 20 25 10
4-Month Moving Average forecasts based on previous 4 months of data
Period 1 2 3 4 5 6 7 8 9 104-Month Moving Average
14 15 15 15 15 18
Historical Demand
10 10 15 20 15 10 15 20 25 10
Forecast
3-Moving Average forecasts based on previous 3 months of data
Period 12345678910
Quarterly Moving Average12151715131520
Historical Demand10101520151015202510
4-Month Moving Average forecasts based on previous 4 months of data
Period 12345678910
4-Month Moving Average141515151518
Historical Demand10101520151015202510
6-Month Moving Average forecasts based on previous 6 months of data
Period 12345678910
6-Month Moving Average13141618
Historical Demand10101520151015202510
Forecast for future 8 months using exponential smoothing and alpha factor () = 0.3Ft+1 = Dt + (1 )Ft
Period PreviousCurrent 12345678
Forecast15181615171614151619
Actual Demand10101520151015202510
Forecast for future 8 months using exponential smoothing and alpha factor () = 0.6
Period PreviousCurrent 12345678
Forecast15181314181612141822
Actual Demand10101520151015202510
Forecast
3-Moving Average forecasts based on previous 3 months of data
Period 12345678910
Quarterly Moving Average12151715131520
Historical Demand10101520151015202510
4-Month Moving Average forecasts based on previous 4 months of data
Period 12345678910
4-Month Moving Average141515151518
Historical Demand10101520151015202510
6-Month Moving Average forecasts based on previous 6 months of data
Period 12345678910
6-Month Moving Average13141618
Historical Demand10101520151015202510
Forecast for future 8 months using exponential smoothing and alpha factor () = 0.3Ft+1 = Dt + (1 )Ft
Period PreviousCurrent 12345678
Forecast15181615171614151619
Actual Demand10101520151015202510
Forecast for future 8 months using exponential smoothing and alpha factor () = 0.6
Period PreviousCurrent 12345678
Forecast15181314181612141822
Actual Demand10101520151015202510
Moving Average Forecast Model
6-Month Moving Average forecasts based on previous 6 months of data
Period 1 2 3 4 5 6 7 8 9 106-Month Moving Average Forecast
13 14 16 18
Historical Demand
10 10 15 20 15 10 15 20 25 10
4-Month Moving Average forecasts based on previous 4 months of data
Period 1 2 3 4 5 6 7 8 9 104-Month Moving Average
14 15 15 15 15 18
Historical Demand
10 10 15 20 15 10 15 20 25 10
Forecast
Period 12345678910AVG
Forecast
Historical Demand10101520151015202510150
3-Moving Average forecasts based on previous 3 months of data
Period 12345678910
3-Month Moving Average Forecast1215171513152015.2380952381
Historical Demand10101520151015202510
4-Month Moving Average forecasts based on previous 4 months of data
Period 12345678910
4-Month Moving Average Forecast14151515151815.2083333333
Historical Demand10101520151015202510
6-Month Moving Average forecasts based on previous 6 months of data
Period 12345678910
6-Month Moving Average Forecast1314161815.2083333333
Historical Demand10101520151015202510
Forecast for future 8 months using exponential smoothing and alpha factor () = 0.3Ft+1 = Dt + (1 )Ft
Period PreviousCurrent 12345678
Forecast15181615171614151619
Actual Demand10101520151015202510
Forecast for future 8 months using exponential smoothing and alpha factor () = 0.6
Period PreviousCurrent 12345678
Forecast15181314181612141822
Actual Demand10101520151015202510
Forecast
3-Moving Average forecasts based on previous 3 months of data
Period 12345678910
Quarterly Moving
