Posted on by Judy

The forecasting department, traditionally reporting to the sale manager, has historically seen a forecast accuracy of about 60%, and this in turn causes problems for the following departments: Purchasing: What should we buy and how much? Production: What should we really build? Inventory management: We keep building the wrong thing. The sales manager asked you to write her a memo, specifically addressing the following: -How could you suggest that your new system would achieve any better levels of forecast accuracy? -Why is forecast accuracy itself not as important under traditional methods?

New system can only achieve better level of forecast accuracy by using various modern forecasting method. Past data will be collected for this analysis and analytics department will use modern predictive analytics method like Arima, Sarima etc. This method will also keep in mind trend, seasonality and cyclicity of the data. So, forecasting will be dynamic and it will consider updated data repository which will result in better accuracy of forecasting.
Under traditional method it mainly derived from past year purchase, sale or inventory. It don’t consider any specifics historic event or seasonality or any bound to happen future event. It ultimately affect the forecast accuracy .So, forecast accuracy is not important in tradition method as it bound to stay below 80%.
 
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  1. The forecasting department, traditionally reporting to the sale manager, has historically seen a forecast accuracy of about 60%, and this in turn causes problems for the following departments: Purchasing: What should we buy and how much? Production: What should we really build? Inventory management: We keep building the wrong thing. The sales manager asked you to write her a memo, specifically addressing the following: -How could you suggest that your new system would achieve any better levels of forecast accuracy? -Why is forecast accuracy itself not as important under traditional methods?
  2. most recent value as the forecast for the next period
  3. As an employee, write an internal memo to your manager addressing the following:
  4. Two different forecasting techniques (F1 and F2) were used to forecast demand for cases of bottled water. Actual demand and the two sets of forecasts are as follows: Predicted Demand Period Demand F1 F2 1 68 66 66 2 75 68 68 3 70 72 70 4 74 71 72 5 69 72 74 6 72 70 76 7 80 71 78 8 78 74 80 a. Compute MAD for each set of forecasts. Given your results, which forecast appears to be more accurate? Explain. b. Compute the MSE for each set of forecasts. Given your results, which forecast appears to be more accurate? c. In practice, either MAD or MSE would be employed to compute forecast errors. What factors might lead a manager to choose one rather than the other? d. Compute MAPE for each data set. Which forecast appears to be more accurate?