Forecasting
A qualitative forecast focuses on value judgement and the individual’s
opinions of the future outcomes. The predictions made by using these
techniques are usually subjective and are normally used when there are no
historical data about the performance of the product – that is, in the early stage
of the product’s lifecycle. The following are the common qualitative techniques
that are utilized in production planning.
Sales force composite
The sales force composite technique relies on the sales force of the firm to make
projections of the future levels of demand for the firm’s product. This method of
forecasting uses the opinions of salespeople to formulate a prediction of sales in the
future. Their inputs may be taken individually and then aggregated as the sales
manager tries to map the trend of future sales. One point to note, though, is that this
type of forecasting is best used in conjunction with other techniques.
Advantage
Relatively inexpensive to get information
Information is almost readily available
Information is almost readily available
Drawbacks
The information received may be limited to a particular locale and cannot be used
generally
This technique is based on opinions and not on statistical data of previous
performance
They may not have sufficient time to develop an accurate forecast.
The Delphi Method uses a group of experts anonymous to each other to make a forecast of
sales, among other things. The way the method works is that when the forecast is
received from each member of the group it is summarised and then sent back to the other
members. The firm will note the concerns and the group will revise their forecasts as
needed until a final prediction is reached. This can be a long and tedious process but the
results are normally more accurate than other qualitative techniques.
Advantage
There is no need to conduct face-to-face interviews which can be difficult to
arrange.
Participants opinions are not influenced by each other or by a dominant individual
Participants have time to think about their responses carefully and thoroughly
Drawbacks
The quality of the results is linked to the quality of the panel used for the forecast.
A poor survey instrument may hamper the research process and the information
being sought
The method is usually time consuming and expensive
There is still a possibility of panel members being indirectly influenced to side with
the majority
Consumer (customer) survey - is a form of marketing research that is used to ascertain the
level of potential demand for a firm’s product.
Problem definition and survey objectives
The objectives of the consumer survey must be clearly defined in order to resolve the
problem.
Create a research plan for collecting information
Having established the problem and stated the research objectives, the next step is to
develop a plan for research. This plan will outline the information that is needed to carry out
the research and how this information will be ascertained. It also outlines the sources of data
and instrument to be used in the process.
Collecting and analyzing
The researchers collect the actual data, using primary and secondary sources. Primary data
is information that has been collected for the purpose of the research while secondary data
represents information that already exists. The information gathered is then analysed to see
similarities and trends.
See page 198 in text
Moving average –
Definitions of moving average
This statistical technique analyses a set of data points by creating an average of a subset at a time
out of the entire set of data. Moving averages is particularly useful when demand for the product
is fluctuating because it removes the effects of these random fluctuations. Since the technique is
taking an average of a subset of data, it eliminates the fluctuation while creating a forecast. In
calculating moving averages and using them to make a forecast, there are some important
concepts to note.
A simple moving average, or SMA, is a type of moving average that displays typical prices for a
certain good or commodity for a specific time frame or look back period. Moving averages are a
type of calculation typically used by stock market professionals to analyze price changes by
calculating averages at set intervals over the course of days, weeks, months or years. The simple
moving average is a
Advantages of simple moving average forecasts
There are a few advantages to using a simple moving average forecast.
Makes it easier to analyze frequently purchased goods: This type of moving average
works well when determining whether to invest in a stock for an item that consumers
purchase on a routine basis. Examples of this include food items, personal care items or
toiletries or car fuel.
Helps distinguish variations: Simple moving average forecasting can help professionals
visualize price trends and variations in stock market prices over a period of time to aide
their decision-making.
Demonstrates support and resistance levels: Simple moving average forecasts give
stock professionals insights into high price points and low price points for a commodity
over time. This enables them to determine whether to purchase a stock or sell a stock
based on the current resistance or support from buyers and sellers.
Provides more reliable data: Because simple moving average forecasting presents a
smooth line to represent data points, there's less room for error during analysis.
