Deck 10: Forecast Implementation

Question 1

You have read the statement that the forecast process begins with a need to make one or more decisions that depend on the future value of some variable. Think about this as it relates to the daily weather forecast you hear, and write a list of five decisions that might depend on such a forecast.

Answer 1

Development and administering a forecasting exercise is useful only when the predicted value of a variable is of some use in a decision-making process for the management. If the management is not making any decisions from the predicted values or just ignoring the values every time, then the entire exercise is waste.
The following five decisions can be made based on the daily weather forecast:
1. The people working is hard climate such as in the coastal areas can be informed and they can use this forecast to bring back themselves into safety while there is a chance of violent weather.
2. It can be used by the businesses in effectively and safely plan the transportation schedules.
3. People can use it to decide the timing of some activities (e.g. fertilizing, gardening, bug spraying etc.) in order make these activities more fruitful.
4. People having health-related issues which are affected by the weather (e.g. allergies, asthma, heat stress etc.) can plan their day by taking extra measures with the weather forecast information.
5. With the daily forecast predictions, it is possible for the scientists to observe the shift of climatic changes over a long period of time.

Question 2

Why do you think communication between the person preparing a forecast and the forecast user is important? Give several specific places in the nine-step forecast process where you think such communication is especially important and explain why.

Answer 2

The entire forecasting process is sub-divided into nine specific steps in order to incorporate communication and collaboration among the preparer and user of the forecast. Communication and collaboration are critical in forecasting in that they bring positive effects in prediction.
The forecast user and preparer must be in close communication with each other in that the forecaster must understand how accurate the forecast is or how useful it is to the user. More the communication more is the chance that the forecast improves over a period of time. On the other side, if there is no communication, after the certain period of time, the forecast may become irrelevant to the user in making the decision.
Following are some of the areas among the nine steps of forecasting process, where communication can be useful:
Specify objective - The user, when communicates with the forecast preparer, ensures that the forecasting method is appropriate and in line with the objectives of forecast. This makes the user more reliant and confident in using the forecast and make effective decisions from it.
Determine what to forecast - In selection of variables (e.g. sales volume or revenue which one is to be selected for forecast), the communication between the forecaster and the user is very crucial in that the variable should be appropriate in attaining the objective.
Determine time dimension - Regular communication can be of substantial use when it comes to determining the time period of forecast (monthly, daily, weekly and so on). The user, over a period of time, can give feedback to the forecaster about the time period about whether to shorten or lengthen the time horizon.
Data Consideration - The communication between the forecaster and the user and well as that between the forecaster and the database maintenance persons are crucial in that the appropriate form of data (aggregated or disaggregated) is to be selected.
Model selection and Model evaluation - The forecaster, with the help of communication with the user, can always make adjustments and amendments in the model selected to make the forecast more accurate and useful to the user. For this, a regular communication between them is required.
Forecast preparations - In order to improve the communication, the forecaster needs to prepare the forecast in different ways. For example, it may be necessary to use more than one method. In may also be necessary to derive a range of estimates instead of a point estimate.
Presentation - The presentation of forecast is another crucial area where communication can be of paramount importance. Better communication during presentation of forecast and the method leads to high confidence of the user and greater probability of usage during decision-making.
Tracking results - Without communication, tracking the accuracy of the forecast is impossible. Without proper tracking, it is impossible to improve the forecast over a period of time.

Question 3

The availability and form of data to be used in preparing a forecast are often seen as especially critical areas. Summarize, in your own words, the database considerations in the forecasting process (step 4).

Answer 3

The data considerations for forecasting involve collection and preparation of data from various sources. There are two primary sources of data - the internal sources and the external sources.
The internal source of data involve the own database of the company. For the forecaster, getting the data is he desired form is essential. For example, the data may be available in the aggregate mode while the forecaster may need that in a disaggregated mode to generate a more accurate forecast. To get the data in the desired form, the forecaster should be in close communication with the database management personnel.
When it comes to external data, the appropriate sources are national, state, or local government's data. Other sources are industry and trade reports, economic surveys, national achieves and so on.

Question 4

Suppose that you have been asked to rSecommend a forecasting technique that would be appropriate to prepare a forecast, given the following situational characteristics:
a. You have 10 years of quarterly data.
b. There is an upward trend to the data.
c. There is a significant increase in sales prior to Christmas each year.
d. A one-year forecast is needed.
e. You, as the preparer of the forecast, have good technical skills, but the manager who needs the forecast is very nontechnical.
f. You need to have the forecast done and the presentation ready in just a few days.
What method(s) would you consider using and why?

Question 5

Write an outline of what you would like to see in a forecast presentation from the perspective of a manager who needs to use the forecast.

Question 6

Explain in your own words how artificial intelligence can be used in a forecasting environment.

Question 7

If you had been assigned the task of forecasting the demand for MP3 players when they were a new product, how might you have approached the problem?