CHAPTER

Forecasting

Manajemen Permintaan
Order Pesanan

Ramalan Permintaan Manajemen Permintaan

Pengelolaan Order Pesanan

Penawaran

Permintaan

Negosiasi

Perjanjian

Kesepakatan

What is Forecasting?
FORECAST:

A statement about the future value of a variable of interest such as demand. Forecasts affect decisions and activities throughout an organization Accounting, finance Human resources Marketing MIS Operations Product / service design

Uses of Forecasts
Accounting Finance Human Resources Marketing MIS Operations Product/service design Cost/profit estimates Cash flow and funding Hiring/recruiting/training Pricing, promotion, strategy IT/IS systems, services Schedules, MRP, workloads New products and services

Peramalan Permintaan

Common in all forecasts

Assumes causal system past ==> future Forecasts rarely perfect because of randomness Forecasts more accurate for groups vs. individuals Forecast accuracy decreases as time horizon increases

I see that you will get an A this semester.

Steps in the Forecasting Process

The forecast

Step 6 Monitor the forecast Step 5 Prepare the forecast Step 4 Gather and analyze data Step 3 Select a forecasting technique Step 2 Establish a time horizon Step 1 Determine purpose of forecast

Forecasting Models
Forecasting Techniques
Qualitative Models Delphi Method Jury of Executive Opinion Sales Force Composite Consumer Market Survey Time Series Methods Naive Moving Average Weighted Moving Average Exponential Smoothing Trend Analysis Causal Methods Simple Regression Analysis Multiple Regression Analysis Seasonality Analysis Multiplicative Decomposition

Model Differences

Qualitative incorporates judgmental & subjective factors into forecast. Time-Series attempts to predict the future by using historical data. Causal incorporates factors that may influence the quantity being forecasted into the model

Qualitative Forecasting Models

Delphi method

Iterative group process allows experts to make forecasts Participants:

decision makers: 5 -10 experts who make the forecast staff personnel: assist by preparing, distributing, collecting, and summarizing a series of questionnaires and survey results respondents: group with valued judgments who provide input to decision makers

Qualitative Forecasting Models (cont)

Jury of executive opinion

Opinions of a small group of high level managers, often in combination with statistical models. Result is a group estimate. Each salesperson estimates sales in his region. Forecasts are reviewed to ensure realistic. Combined at higher levels to reach an overall forecast. Solicits input from customers and potential customers regarding future purchases. Used for forecasts and product design & planning

Sales force composite

Consumer market survey.

Time Series Forecasts

Trend - long-term movement in data Seasonality - short-term regular variations in data Cycle wavelike variations of more than one years duration Random variations - caused by chance

Pola Kecenderungan Data Historis Penjualan

Forecast Error

Bias - The arithmetic sum of the errors

Forecast Error = At Ft
T

Mean Square Error - Similar to MSE = | forecast error | 2 /T simple sample variance t =1

= (At Ft ) 2 / T
t =1

MAD - Mean Absolute Deviation MAPE Mean Absolute Percentage Error

MAD = | forecast error | /T = |At Ft | / T

t =1 t =1

MAPE = 100 [|At Ft | / At ] / T

t =1

Example
Period 1 2 3 4 5 6 7 8 Actual 217 213 216 210 213 219 216 212 Forecast 215 216 215 214 211 214 217 216 (A-F) 2 -3 1 -4 2 5 -1 -4 -2 |A-F| 2 3 1 4 2 5 1 4 22 (A-F)^2 4 9 1 16 4 25 1 16 76 (|A-F|/Actual)*100 0,92 1,41 0,46 1,90 0,94 2,28 0,46 1,89 10,26

MAD= MSE= MAPE=

2,75 9,50 1,28

Controlling the Forecast

Control chart A visual tool for monitoring forecast errors Used to detect non-randomness in errors

Forecasting errors are in control if All errors are within the control limits No patterns, such as trends or cycles, are present

Controlling the forecast

Control charts

Control charts are based on the following assumptions: when errors are random, they are Normally distributed around a mean of zero. Standard deviation of error is MSE 95.5% of data in a normal distribution is within 2 standard deviation of the mean 99.7% of data in a normal distribution is within 3 standard deviation of the mean Upper and lower control limits are often determine via 0 2 M SE or 0 3 M SE

Example

Compute 2s control limits for forecast errors of previous example and determine if the forecast is accurate.
5.41

s = MSE = 3.295 2 s = 6.59

3.41

1.41 -0.59 0

10

Errors are all between -6.59 and +6.59 No pattern is observed Therefore, according to control chart criterion, forecast is reliable

-2.59

-4.59 -6.59

Quantitative Forecasting Models

Time Series Method

Nave

Whatever happened recently will happen again this time (same time period) The model is simple and flexible Provides a baseline to measure other models Attempts to capture seasonal factors at the expense of ignoring trend

Ft = Yt 1
Ft = Yt 4 : Quarterly data Ft = Yt 12 : Monthly data

Naive Forecasts

Uh, give me a minute.... We sold 250 wheels last week.... Now, next week we should sell....
The forecast for any period equals the previous periods actual value.

Nave Forecast
Wallace Garden Supply
Forecasting
Storage Shed Sales

Period January February March April May June July August September October November December

Actual Nave Value Forecast 10 N/A 12 10 16 12 13 16 17 13 19 17 15 19 20 15 22 20 19 22 21 19 19 21

Error 2 4 -3 4 2 -4 5 2 -3 2 -2 0,818 BIAS

Absolute Error 2 4 3 4 2 4 5 2 3 2 2 3 MAD

Percent Error 16,67% 25,00% 23,08% 23,53% 10,53% 26,67% 25,00% 9,09% 15,79% 9,52% 10,53% 17,76% MAPE

Squared Error 4,0 16,0 9,0 16,0 4,0 16,0 25,0 4,0 9,0 4,0 4,0 10,091 MSE 3,176619

Standard Error (Square Root of MSE) =

Nave Forecast Graph

Wallace Garden - Naive Forecast 25

20

15 Sh ed s Actual Value Nave Forecast 10

0 February March April May June July Period August September October November December

Uses for Naive Forecasts

Stable time series data

F(t) = A(t-1) F(t) = A(t-n) F(t) = A(t-1) + (A(t-1) A(t-2))

Seasonal variations

Data with trends

Naive Forecasts

Simple to use Virtually no cost Quick and easy to prepare Easily understandable Can be a standard for accuracy Cannot provide high accuracy

Techniques for Averaging

Moving average Weighted moving average Exponential smoothing

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Metode Peramalan Deret Waktu

Teknik peramalan yang menggunakan data-data historis penjualan beberapa waktu terakhir dan mengekstrapolasinya untuk meramalkan penjualan di masa depan Peramalan deret waktu mengasumsikan pola kecenderungan pemasaran akan berlanjut di masa depan. Sebenarnya pendekatan ini cukup naif, karena mengabaikan gejolak kondisi pasar dan persaingan

29

LangkahLangkah-langkah Peramalan Deret Waktu

Kumpulkan data historis penjualan Petakan dalam diagram pencar (scatter diagram) Periksa pola perubahan permintaan Identifikasi faktor pola perubahan permintaan Pilih metode peramalan yang sesuai Hitung ukuran kesalahan peramalan Lakukan peramalan untuk satu atau beberapa periode mendatang

Moving Averages

Moving average A technique that averages a number of recent actual values, updated as new values become available. n

MAn =

1 Ai i= n

The demand for tires in a tire store in the past 5 weeks were as follows. Compute a three-period moving average forecast for demand in week 6. 83 80 85 90 94

Moving average & Actual demand

Moving Averages
Wallace Garden Supply
Forecasting
Storage Shed Sales

Period January February March April May June July August September October November December

Actual Value 10 12 16 13 17 19 15 20 22 19 21 19

Three-Month Moving Averages

10 12 16 13 17 19 15 20 22

+ + + + + + + + +

12 16 13 17 19 15 20 22 19

+ + + + + + + + +

16 13 17 19 15 20 22 19 21

/ / / / / / / / /

3 3 3 3 3 3 3 3 3

= = = = = = = = =

12.67 13.67 15.33 16.33 17.00 18.00 19.00 20.33 20.67

Moving Averages Forecast

Wallace Garden Supply
Forecasting 3 period moving average
Actual Value - Forecast

Input Data Period Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Next period Actual Value 10 12 16 13 17 19 15 20 22 19 21 19 19.667

Forecast Error Analysis Forecast Error Absolute error Squared error Absolute % error

12.667 13.667 15.333 16.333 17.000 18.000 19.000 20.333 20.667 Average

0.333 3.333 3.667 -1.333 3.000 4.000 0.000 0.667 -1.667 12.000 BIAS

0.333 3.333 3.667 1.333 3.000 4.000 0.000 0.667 1.667 2.000 MAD

0.111 11.111 13.444 1.778 9.000 16.000 0.000 0.444 2.778 6.074 MSE

2.56% 19.61% 19.30% 8.89% 15.00% 18.18% 0.00% 3.17% 8.77% 10.61% MAPE

Moving Averages Graph

Three Period Moving Average
25

20

15 Va lu e Actual Value Forecast 10

0 1 2 3 4 5 6 Time 7 8 9 10 11 12

Moving Averages

Weighted moving average More recent values in a series are given more weight in computing the forecast.
Assumes data from some periods are more important than data from other periods (e.g. earlier periods). Use weights to place more emphasis on some periods and less on others.

Example:

For the previous demand data, compute a weighted average forecast using a weight of .40 for the most recent period, .30 for the next most recent, .20 for the next and .10 for the next. If the actual demand for week 6 is 91, forecast demand for week 7 using the same weights.

Weighted Moving Average

Wallace Garden Supply
Forecasting
Storage Shed Sales

Period January February March April May June July August September October November December Next period

Actual Value Weights 10 0,222 12 0,593 16 0,185 13 17 19 15 20 22 19 21 19 20,185 1,000

Three-Month Weighted Moving Averages

2,2 2,7 3,5 2,9 3,8 4,2 3,3 4,4 4,9

+ + + + + + + + +

7,1 9,5 7,7 10 11 8,9 12 13 11

+ + + + + + + + +

3 2,4 3,2 3,5 2,8 3,7 4,1 3,5 3,9

/ / / / / / / / /

1 1 1 1 1 1 1 1 1

= = = = = = = = =

12,298 14,556 14,407 16,484 17,814 16,815 19,262 21,000 20,036

Sum of weights =

Weighted Moving Average

Wallace Garden Supply
Forecasting 3 period weighted moving average

Input Data Period Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Next period Sum of weights = Actual value 10 12 16 13 17 19 15 20 22 19 21 19 20.185 1.000 Weights 0.222 0.593 0.185

Forecast Error Analysis Forecast Error Absolute error Squared error Absolute % error

12.298 14.556 14.407 16.484 17.814 16.815 19.262 21.000 20.036 Average

0.702 2.444 4.593 -1.484 2.186 5.185 -0.262 0.000 -1.036 1.988 BIAS

0.702 2.444 4.593 1.484 2.186 5.185 0.262 0.000 1.036 6.952 MAD

0.492 5.971 21.093 2.202 4.776 26.889 0.069 0.000 1.074 6.952 MSE

5.40% 14.37% 24.17% 9.89% 10.93% 23.57% 1.38% 0.00% 5.45% 10.57% MAPE

Exponential Smoothing

ES didefinisikan sebagai:

Ft +1 = Dt + (1 ) Ft
Keterangan: Ft+1 = Ramalan untuk periode berikutnya Dt = Demand aktual pada periode t Ft = Peramalan yg ditentukan sebelumnya untuk periode t = Faktor bobot besar, smoothing yg dilakukan kecil kecil, smoothing yg dilakukan semakin besar optimum akan meminimumkan MSE, MAPE

Contoh Exponential Smoothing

Period Demand 1 2 3 4 5 6 7 8 9 10 11 12 37 40 41 37 45 50 43 47 56 52 55 54 Forecast , Ft+1 =0.3 37 37.9 38.83 38.28 40.29 43.20 43.14 44.30 47.81 49.06 50.84 51.79 =0.5 37 38.5 39.75 38.37 41.68 45.84 44.42 45.71 50.85 51.42 53.21 53.61

Ft +1 = Dt + (1 ) Ft

Exponential Smoothing

Ft = Ft-1 + (At-1 - Ft-1)

The most recent observations might have the highest predictive value.

Therefore, we should give more weight to the more recent time periods when forecasting.

Exponential Smoothing

Ft = Ft-1 + (At-1 - Ft-1)

Weighted averaging method based on previous forecast plus a percentage of the forecast error A-F is the error term, is the % feedback

Example - Exponential Smoothing

Period Actual 1 83 2 80 3 85 4 89 5 92 6 95 7 91 8 90 9 88 10 93 11 92 12 0,1 83 82,70 82,93 83,54 84,38 85,44 86,00 86,40 86,56 87,20 87,68 Error -3,00 2,30 6,07 8,46 10,62 5,56 4,00 1,60 6,44 4,80 0,4 83 81,80 83,08 85,45 88,07 90,84 90,90 90,54 89,53 90,92 91,35 Error -3 3,20 5,92 6,55 6,93 0,16 -0,90 -2,54 3,47 1,08

Picking a Smoothing Constant

Exponential Smoothing
Actual Alpha=0.10 Alpha=0.40

100 95 Demand 90 85 80 75 70 2 3 4 5 6 7 8 9 10 11 Period

Exponential Smoothing Data

Wallace Garden Supply
Forecasting
Storage Shed Sales

Exponential Smoothing Period January February March April May June July August September October November December Actual Value 10 12 16 13 17 19 15 20 22 19 21 19 Ft 10 10 10 10 11 11 12 12 13 13 14 15 + + + + + + + + + + + 0,1 0,1 0,1 0,1 0,1 0,1 0,1 0,1 0,1 0,1 0,1 0,1 At *( *( *( *( *( *( *( *( *( *( *( 10 12 16 13 17 19 15 20 22 19 21 Ft 10 10 10 11 11 12 12 13 13 14 15 )= )= )= )= )= )= )= )= )= )= )= Ft+1 10,000 10,200 10,780 11,002 11,602 12,342 12,607 13,347 14,212 14,691 15,322

Exponential Smoothing
Wallace Garden Supply
Forecasting Exponential smoothing

Input Data Period Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Alpha Next period Actual value 10 12 16 13 17 19 15 20 22 19 21 19 0.419 19.573

Forecast Error Analysis Forecast 10.000 10.000 10.838 13.000 13.000 14.675 16.487 15.864 17.596 19.441 19.256 19.987 Average Error 2.000 5.162 0.000 4.000 4.325 -1.487 4.136 4.404 -0.441 1.744 -0.987 Absolute error 2.000 5.162 0.000 4.000 4.325 1.487 4.136 4.404 0.441 1.744 0.987 2.608 MAD Squared error 4.000 26.649 0.000 16.000 18.702 2.211 17.106 19.391 0.194 3.041 0.973 9.842 MSE Absolute % error 16.67% 32.26% 0.00% 23.53% 22.76% 9.91% 20.68% 20.02% 2.32% 8.30% 5.19% 14.70% MAPE

Sheds 10 15 20 25 0 5
Ja nu ar y Fe br ua ry

M ar ch

Ap ril

M ay

Ju ne

Ju ly

Exponential Smoothing

A ug

us t Se pt em be r

O ct ob e

r N ov em be r D ec em be r

Exponential Smoothing

Forecast

Actual value

Techniques for Trend

Develop an equation that will suitably describe trend, when trend is present. The trend component may be linear or nonlinear We focus on linear trends

Common Nonlinear Trends

Parabolic

Exponential

Growth

Linear Trend Equation

Ft

Ft = a + bt

Ft = Forecast for period t 0 1 2 t = Specified number of time periods a = Value of Ft at t = 0 b = Slope of the line

3 4 5

Example

Sales for over the last 5 weeks are shown below: 1 2 150 157 3 162 4 166 5 177

Week: Sales:

Plot the data and visually check to see if a linear trend line is appropriate. Determine the equation of the trend line Predict sales for weeks 6 and 7.

Line chart
Sales 180 175 170 165 Sales 160 155 150 145 140 135 1 2 3 Week 4 5 Sales

Calculating a and b

n (ty) - t y b = 2 - ( t) 2 n t

y - b t a = n

Linear Trend Equation Example

t Week 1 2 3 4 5 t 1 4 9 16 25
2 2

y Sales 150 157 162 166 177

ty 150 314 486 664 885

t = 15 t = 55 2 ( t) = 225

y = 812 ty = 2499

Linear Trend Calculation

b = 5 (2499) - 15(812) 5(55) - 225 = 12495-12180 275 -225 = 6.3

812 - 6.3(15) a = = 143.5 5

y = 143.5 + 6.3t

Linear Trend plot

Actual data 180 175 170 165 160 155 150 145 140 135 1 2 3 4 5 Linear equation

Problem 1

National Mixer Inc. sells can openers. Monthly sales for a seven-month period were as follows: Forecast September sales volume using each of the following:

Month Feb Mar Apr May Jun Jul Aug

Sales (1000) 19 18 15 20 18 22 20

A five-month moving average Exponential smoothing with a smoothing constant equal to .20, assuming a March forecast of 19. The naive approach A weighted average using .60 for August, .30 for July, and .10 for June.

Recall: Problem 1

National Mixer Inc. sells can openers. Monthly sales for a seven-month period were as follows:

Month Feb Mar Apr May Jun Jul Aug

Sales (1000) 19 18 15 20 18 22 20

Plot the monthly data Forecast September sales volume using a line trend equation Compute MAD, MSE, and MAPE each method of forecast. Which method of forecast seems least appropriate?