Mgs 3100 week 3 notes
Mgs 3100 week 3 notes MGS 3100
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This 2 page Class Notes was uploaded by Tricia Williams on Sunday June 19, 2016. The Class Notes belongs to MGS 3100 at Georgia State University taught by Mark Sweatt in Summer 2016. Since its upload, it has received 54 views. For similar materials see Buisness Analysis in Managerial Science at Georgia State University.
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Date Created: 06/19/16
MGS 3100 in-class notes (6/22/2016) Forecasting -Making predictions of the future that is based on past and present information and trends. Two major groups of forecasting 1. Qualitative:- Uses expert judgement rather than numerical analysis 2. Quantitative:- Uses numerical analysis and are express mathematically Casual forecasting: - An estimation that is based on other variables that is considered the causes of the particular thing of interest. Time Series forecasting: - When something is forecasted base on its own past values without the use of any other variables. Steps involve in forecasting: 1. We look 2. We forecast 3. We evaluate Averaging Techniques 1. Naïve forecast: Assumes consistency in the sense where actual sales from one period is forecasted for the next period 2. Moving Averages:- is forecasted by taking the average of immediate preceding sales for a certain number of periods. It can be two, three or four periods etc. Different types of evaluation 1. BIAS:- Tells how far off from actual sales the forecast is in either a negative or positive direction on average. If the bias is positive, it means that the forecast is underestimated, and if the bias is negative, it means that the forecast is overestimated. Additionally, a negative bias means that you stored more inventory that what actually sold and a positive bias means that you did not meet your customers demand. 2. Mean absolute deviation (MAD):- The average of absolute value (positive numbers) of the errors (the difference between actual sales and forecasted sales). 3. Mean Absolute Percent Error (MAPE):- take the average of the errors as a percentage of actual sales. Eg. Use each absolute error and find the percentage of their corresponding sales and then average of all the percentages. 4. Mean squared error (MSE):- take the average of the absolute errors after they have been squared. 5. Standard Error (SE): Taking the square root of the average MSE. Interpreting the evaluations 1. BIAS (0.50 as reference) The positive value of 0.50 means that the forecast is underestimating sales on average by 0.50. If the figure were negative, sales would have been overestimated. 2. MAD (0.75 as reference) The mad of 0.75, means that on average, the forecast is away from the actual sales in either a positive/negative direction by 0.75. 3. MAPE(25% as reference) The MAPE value of 25% means that the error is 25% of the actual sales forecasted on average.
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