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BM403 Assignment
Question. FORECASTING TECHNIQUES
As from the table above the forecasted demand for the week (31jobs) was mainly based
on what had happened the previous week. However there was a great variance between
the actual demand and forecasted demand that is (23-31=-8).
Judgmental technique
The company also use judgmental technique to forecast their demand. This method takes
the opinion of small group of high level managers. There are normally individuals or
groups within the organization whose judgment and opinions regarding the future are as
valid or more valid than those of outside experts. Top managers are the key group
involved in the development of forecasts for strategic plans. They are generally most
familiar with their firms’ own capabilities and resources.
The main disadvantage of this method is that the view of one manager perhaps the most
senior executive can bias the entire jury.
Forecasting demand for united panel beaters using other quantitative methods
Moving average
Moving averages are useful if we can assume that market demands will stay fairly steady
over time. The simple moving average method uses several demand values during the
recent past to develop a forecast. This tend to smooth out the random increases and
decreases of a forecast that uses only one period.
Forecasting using two-day and three-day averages
Actual Forecast for 8-13 Forecast for 8-13
demand 1-6 March (jobs) 2- March (jobs) 3-
March (jobs) day moving day moving
average average
Monday 3
Tuesday 4 (3+4)/2 = 3.5
Wednesday 3 (4+3)/2 = 3.5 (3+4+3)/3 = 3.3
Thursday 2 (3+2)/2 = 2.5 (4+3+2)/3 = 3
Friday 5 (2+5)/2 = 3.5 (3+2+5)/3 = 3.3
Saturday 6 (5+6)/2 = 5.5 (2+5+6)/3 = 4.7
Total 23
Exponential smoothing
Exponential smoothing is one of the most popular and frequently used forecasting
technique. Exponential smoothing requires minimal data. Only the forecast for the
current period, the actual demand for the current period and a weighting factor called
smoothing constant are necessary. A smoothing constant is the weighting factor given to
the most recent data in exponential smoothing forecasts.