MGCR 472 Lecture Notes - Lecture 2: Contribution Margin, Demand Forecasting, Moving Average
9 Jan 2015
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You know the relationship among demand; supply; and price of a product, (keeping one of these parameters constant, how an increase/decrease of one affects the other) ! In a product life cycle (incubation, growth, mature, decline), the subjective forecasting techniques (opinion based, e. g. delphi method) are used during incubation and decline phases. The quality of the forecasts can be understood by measuring: mean absolute deviation (mad) that weighs all errors equally, mean square error (mse) that magnifies the error, mean absolute percentage error (mape) that weighs an error relative to actual value. However, you must practice fast and accurate number crunching! It"s very easy to make a silly computation mistake, though you know the subject matter. In simple or double exponential smoothing, if the initial forecast is not given, assume: f1 = a1. In double exponential smoothing, if the initial trend is not given, it is: t1= a2 a1.
