QUANTITATIVEFORECAST

Presented by: Liliana Cruz Cruz Julie Tatiana Gonzlez Lemus Mnica Forero Parra Nina Milena Salamanca Cordero
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JUSTIFICATION
Quantitative methods are intended to provide a series of models that facilitate to take decision in organizations. These are applicable in the area of business management, so we try to show some of its most important applications in different fields the business environment.

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OBJECTIVE

Developquantitative criteria fordecision take relevantfor situationswithin organizations.

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CONTENT
QUANTITATIVEFORECAST
Linear

Regression average moving average Smoothing smoothingwithtrend

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Moving

Weighted

Exponential Exponential

QUANTITATIVEFORECAS T
Quantitativeforecastingmodelsare Haga clic para modificar el estilo de subttulo del mathematical modelsbased on historical data patrn

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Thesemodels can be usedwith time series. forecast accuracydepends onthe relationwith the real data.

The

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Long term Forecasts

Long

term forecast are the estimative of future conditions for long periods longer than one year. help the management of production to take strategic decisions about product planning, processes, technologies and facilities

These

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Data Patterns
Trendpattern Cyclepattern Seasonalpattern Randomfluctuation

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1.LinearRegressionand Correlation
Analysis of linearregression and correlationis aforecastmodelthat relates a dependent variableand one or moreindependent variables.
Simple

linearregression Multiple linearregression

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Simple LinearRegression
Regression equation: Y= a + bx Y dependent variable andpredicted

variable. x independent variable.

intersectionwith the vertical axis slope of the trend line

a b

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FormulasforSimple LinearRegression Analysis

X= independentvariable values Y= dependentvariable values n= number of observations a= intersectionwith the vertical axis b= slope of the trend line 4/21/12 y= values of y inthe

Example #1
Specific

Motors produce motores elctricos para vlvulas automticas para la industria de la construccin. Durante ms de un ao, la planta de produccin de Specific ha operado a casi plena capacidad. Jim White, el gerente de la planta, estima que el crecimiento en las ventas continuar y desea desarrollar un pronstico a largo plazo que se usar para planear las necesidades de las instalaciones para los siguientes tres aos. Se han totalizado las cifras de ventas correspondientes a los ltimos diez aos:
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YEAR

ANNUAL SALES

1 2 3 4 5 6 7 8 9 10

1.000 1.300 1.800 2.000 2.000 2.000 2.200 2.600 2.900 3.200
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SOLUTIO N
YEAR 1 2 3 4 5 6 7 8 9 10 TOTAL ANNUAL SALES 1.000 1.300 1.800 2.000 2.000 2.000 2.200 2.600 2.900 3.200 21.000 PERIOD (x) 1 2 3 4 5 6 7 8 9 10 55
X2 xy

1 4 9 16 25 36 49 64 81 100

1000 2600 5400 8000 10000 12000 15400 20800 26100 32000

3025 133300 4/21/12

1. Finda andb

SOLUTIO N

2. Regressionequationto predictfuture sales

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SOLUTIO N

3. Sales forecastfor future years

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Example #2
Jack

Weis, gerente de Precision Corporation, supone que los servicios de ingeniera que su empresa proporciona a las empresas en construccin de carreteras estn directamente relacionados con la cantidad de contratos de construccin. El gerente quiere planear mejor sus operaciones, por lo que desea saber el nivel de demanda durante los siguientes cuatro trimestres y el grado de exactitud en que se relacionan la demanda con la cantidad de contratos.
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Year QuarterSales of services Contracts (thousands of dollars) s (thousands of dollars)

Estimate ofthe next four quarters are: 260, 290, 300 and 270

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Period Sales (Y) Contracts

X2

xy

y2

1. Finda andb

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2.forecastforthe next four quarters

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correlationcoefficient (r)
It

measuresthe relationship between twovariablesy andx. can assume anyvalue between-1 and+1 r =negative,y, xmovein opposite directions r=positive, xismoving in thesame direction.
Where: -1perfect negativerelationship -0.9Strong negativerelationship 0there is norelationship betweeny andx +0.3Weakpositive relationship +1Perfect positiverelationship

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correlationcoefficient (r)

Coefficientof determination (r2 ) indicates that part ofthetotalvariationin the dependent variableis explained byx,or thetrend line.

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 3.

assessment of how muchdemandisattachedto the amount of construction contractsreleased.

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forecast range
Forecasts

areestimates andarethereforesubject tomistake. has led toconfidence intervals.

This If

the limits arecloseto eachother, theywillhave confidence inthe predictions

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The forecaststandardmistake
measure

of theway they havebeenscatteredon eitherside ofthe trendlinehistorical datapoints.

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Example #3

Datawere usedannual sales ofspecificmotorsin Example 1. the distributionof allfutureforecastvaluesis supposed to beat-distribution. SOLUTION

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 3.

calculatetheupper and lowerlimitsfor theperiod 11forecast (G.l) =n-2 =0.10 /2 =0.05 t=1.860

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seasonality intime seriesforecasts

seasonal

patternsare fluctuationsthat occurwithin a yearand tend tobe repeated annually.

1.Selecta representative set ofhistorical data. 2.Develop aseasonal indexfor each station, month or quarter. 3.Useseasonalratesforseasonally adjusteddata. In other wordsremoveseasonal patterns. 4.Perform alinearregression analysisonseasonally adjusted data 5.Usethe regression equationto calculatethe predictionsof the future. 6.Useseasonalratesto 4/21/12

Example #4

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SOLUTION
1.first

computetheseasonalindices.

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2.Then Seasonally adjusteddata

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3.doregression analysisonseasonally adjusted data

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4.we usethese valuesto replace themand findb

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5. nowwe replacethese will bethe predictions13,14,15,16seasonallyfor the next fourquarter

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6.usethe seasonal(IE) forthe predictionsseasonally

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SHORT TERM FORECASTS

These

are estimates of future situations over periods ranging from a few days to several weeks.

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 PROVIDE

INFORMATION TO MAKE DECISIONS SUCH AS: How much stocktaking of a product in particular should stay next month? much of each product should be scheduled for production next week?

How

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 How

much of each raw material you request is for delivery the next week? many workers should be scheduled to work in normal time and time extra?

How

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EVALUATION OF THE PERFORMANCE OF THE FORECASTING MODEL: Forecasting models are evaluated according to three features: Impulse response, noise buffering capacity and precision. Forecasts reflecting all the small fluctuations that have occurred in the past data is said to include random variations or noise.
The

forecasts are small fluctuations from one period to another is said to have noise 4/21/12 damping.

MEASURES THE ACCURACY OF FORECASTING

The accuracy of a forecast model refers to that it follow as close to the actual data forecasts: Three precision measurements are used:
1)

Standard error of the forecast (Syx) 2) Average quadratic error (MSE) 3) Average absolute deviation (MAD)

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 Like

Syx and the average quadratic error (MSE), if MAD is small, the actual data follow closely to the forecasts of the dependent variable and the forecast model is giving precise data.
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NAIVE FORECASTS
They are those who are quick and easy to use, and have virtually no cost and are easy to understand. Example:
1)

The use of sales yesterday as today's sales forecast 2) Use of the sales of the same date last year as sales of morning forecast.
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METHOD OF MOVING AVERAGES

This

method averages the data of a few recent periods and this average becomes the prognosis for the next period.

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METHOD OF WEIGHTED MOVING AVERAGES

In

some situations it might be desirable to apply weights coefficients weights to historical data.

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 Example:

If we consider that some more recent data are more important for the Outlook, cannot be pesos or higher coefficients of weighting these data as indicated below:

Week _ Data reales Peso o coefficient of weighting. 7 85 20 8 102 30 4/21/12

EXPONENTIAL SMOOTHING METHODS

This

method takes the outcome of the previous period and incorporating you an adjustment for the forecast of the next period. This settings is proportional to the previous error and it is calculated by multiplying the error of forecast of the period by a constant between zero and one, this constant alpha () is known as the smoothing constant.

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BIBLIOGRAFIA
Gaither&Fraizer.

Captulo 3. Los pronsticos en la administracin de la produccin y de las operaciones. Jacobs y Aquilano. Captulo 12. Pronsticos.

Chase,

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