Forecasting delphi language programming

• Good forecasts can lead to– Reduced inventory costs – Lower overall personnel costs – Increased customer satisfaction • The forecasting process can be based on: – Educated guess – Expe

Introduction;

Qualitative Models

Forecasting

What is a Forecast?

• A guess about what is going to happen in the future

• An integral part of almost all business

enterprises

• Logical and rational, but still a guess!

• Objective is to minimize error (as you will always be wrong!)

• Could be a complicated or simple process

• Good forecasts can lead to

– Reduced inventory costs

– Lower overall personnel costs

– Increased customer satisfaction

• The forecasting process can be based on:

– Educated guess

– Expert opinions

– Past history

What is a Forecast? (cont’d)

Introduction to Forecasting: Examples

 Manufacturing firms forecast demand for their product,

to schedule manpower and raw material allocation

 Service organizations forecast customer arrival patterns

to maintain adequate customer service

 Security analysts forecast revenues, profits, and debt ratios, to make investment recommendations

 Firms consider economic forecasts of indicators

(housing starts, changes in gross national profit) before deciding on capital investments

Model Differences

• Qualitative – opinion-based; incorporates

judgmental and subjective factors into forecast

• Quantitative – number-based; most frequently used

– Time-Series – attempts to predict the future by using historical data over time

– Causal – incorporates factors that may influence the quantity being forecasted into the model

Forecasting Models

Forecasting Techniques

Qualitative

Models Time Series Methods

Causal

Methods

Delphi Method Jury of Executive Opinion Sales Force Composite Consumer Market Survey

Naive Moving Average Weighted Moving Average Exponential Smoothing Trend Analysis

Seasonality Analysis Simple

Regression Analysis

Multiple Regression Analysis

Multiplicative Decomposition

Qualitative Models: Using Expert Judgment

Many important forecasts are not based on formal models For example, during the high-interest-rate period of 1980 and

1981, the most influential forecasters of interest rates were

Henry Kaufman of Salomon Brothers and Albert Wojnilower

of First Boston

These gentlemen combined relevant factors such as the money supply and unemployment, as well as results from quantitative models, in their own intuitive way to produce forecasts that had widespread credibility and impact on the financial

community

If you needed a long-term forecast for the personal computer market, what approach would you take?

The Delphi Method confronts the problem of obtaining a combined forecast from a group of experts.

The consensus panel approach is to bring the experts

together in a room and let them discuss an event until a

consensus emerges However, due to group dynamics, one person with a strong personality can have an enormous

effect on the forecast

The Delphi Method was developed by the Rand

Corporation to retain the strength of a joint forecast, while removing the effects of group dynamics.

The Delphi Method

The Delphi Method (cont’d)

– Iterative group process allows experts to make forecasts without meeting face-to-face

– Participants are typically 5-10 experts who make the forecast

– Staff personnel assist by preparing, distributing, collecting, and summarizing a series of

questionnaires and survey results

– After three or four passes through this process, a consensus forecast typically emerges.

Grassroots Forecasting

The “Grassroots” technique is based on the concept of asking those who are close to the eventual consumer, such as

salespeople, about what they are going to sell next period, and added the forecasts to predict total demand

Requires an experienced stable work force that knows the

customer base Not good at retail!

Can be expensive Takes sales people away from sales effort Results can be biased

In more sophisticated systems, forecasts may be adjusted on the basis of the historical correlation between the salesperson’s

forecasts and the actual sales

Market research is a large and important topic which includes

a variety of techniques, from consumer panels through

consumer surveys and on to test marketing

The goal of market research is to make predictions about the size/structure of the market for specific goods and/or services

These predictions (forecasts) are usually based on small

samples and are qualitative in the sense that the original data typically consist of subjective evaluations of consumers

Market research is an important activity in most consumer

product firms It also plays an increasingly important role in the political and electoral process

Consulting Customers (Market Research)

Jury of Executive Opinion

– Opinions of a small group of high level

managers

– Often in combination with statistical models – Result is a group estimate