QUANTITATIVE

TECHNIQUES
By,
MATHEW.M.C
 Quantitative methods

 These types of forecasting methods are

based on quantitative models, and are
objective in nature. They rely heavily
on mathematical computations .
 Quantitative methods are
categorized into two
 Time series model
These models predict on the assumption that future is
the projection of the past. They analyze a series of
past data to forecast for the future
 Casual models
Casual forecasting methods are based on a known or
perceived relationship between the factor to be
forecast and other external or internal factors
Time series models
 Simple Moving average.
 Weighted moving average.
 Exponential smoothing models
Casual models
 Regression analysis
 Components time series
model
 Average: the mean of the observations over time .
 Trend: a gradual increase or decrease in the average over time.
 Seasonal Influence: predictable short-term cycling behavior
due to time of day, week, month, season, year, etc.
 Cyclical Movement: unpredictable long-term cycling behavior
due to business cycle or product/service life cycle.
 Random Error: remaining variation that cannot be explained
by the other four components
 Simple moving average

 A moving average forecast uses a number

of most recent historical actual data values
to generate a forecast.
Simple Moving Average: =1/n (D1+D2 +D3 + …..+Dn)
Where n= no. of years.
D1= oldest period.
Dn= recent periods
 Weighted average method

 Each historical demand in the moving

average can have its own weight and the
sum of the weights is equal to one
 Exponential moving average
 Exponential smoothing gives greater weight to
demand in more recent periods, and less weight to
demand in earlier periods.

Average: Ft= Ft-1 + a( Dt-1 – Ft-1 )

a= smoothing constant.
Ft-1 = Forecast of previous month.
Dt-1 = Actual sales of the month.
Ft = Forecast of future month.
 Regression Analysis
 Provides techniques for the modeling and analysis
of numerical data consisting of values of a
dependent variable (also called response variable
or measurement) and of one or more independent
variables (also known as explanatory variables or
predictors).
 The dependent variable in the Regression equation
is modeled as a function of the independent
variables, corresponding parameters (constants),
and an error term.
 Continued..

 The error term is treated as a random

variable.
 It represents unexplained variation in the
dependent variable.