Forecasting and Methods of Forecasting in Production Planning
- 1. FORECASTING AND METHODS OF FORECASTING IN PRODUCTION PLANNING Submitted By: Bhanu Arora
- 2. PRODUCTION PLANNING Production planning involves management decisions on the resources that the firm will require for its manufacturing operations and the selection of these resources to produce the desired goods at the appropriate time and at the least possible cost.
- 3. OBJECTIVES OF PRODUCTION PLANNING To determine the requirements of men, material and equipment. Arranging production schedules according to the needs of marketing demand. Arranging various inputs at a right time and in right quantity. Making most economical use of various inputs. To achieve coordination among various departments relating to production. To make all arrangements to remove possible obstacles in the way of smooth production. To achieve economy in production cost and time.
- 4. PRODUCTION PLANNING AND CONTROL Production planning and control is the co-ordination of series of functions according to a plan which will economically utilize the plant facilities and regulate the orderly movement of goods through the entire manufacturing cycle from the procurement of all materials to the shipping of finished goods at a predetermined rate.
- 5. CHARACTERISTICS OF PRODUCTION PLANNING AND CONTROL It is the planning and control of manufacturing process in an enterprise. All types of inputs like materials, men, machines are efficiently used for maintaining efficiency of manufacturing process. Various factors of production are integrated to use them efficiently and economically. The manufacturing process is organized in such a way that none of the work centers is either overworked or under worked.
- 6. FORECASTING Contents to Forecasting are: Introduction for Forecasting The strategic role of forecasting Components of forecasting demand Time series methods Forecasting
- 7. FORECASTING Forecasting is essential for number of planning decisions and often provides a valuable input on which operations of the business enterprises depend. Forecasting is a process of estimating a future event by casting forward past data. The past data are systematically combined in a predetermined way to obtain the estimate of the future. Prediction is a process of estimating a future event based on subjective considerations other than just past data; these subjective considerations need not be combined in a predetermined way.
- 8. THE STRATEGIC ROLE OF FORECASTING Supply chain Management Quality Management Strategic planning
- 9. COMPONENTS OF FORECASTING DEMAND Time frame Short Range Forecasts Medium Range Forecasts Long Range Forecasts
- 10. Short Range Forecasts Short-term forecasts are usually made for tactical reasons that include production planning and control, short-term cash requirements and adjustments that need to be made for seasonal sales fluctuations. Such forecasts are for periods of less than one year, with a normal range between one and three months.
- 11. Medium Range Forecasts These are made for minor strategic decisions in connection with the operation of the business. They are important in the area of business budgeting for the operating budget, and it is from this forecast that company budgets are built up. Incorrect forecasting can have serious implications for the rest of the organization, for if it turns out to be over- optimistic, the organization will be left with unsold stock and will have overspent on production. The time period for a medium-term forecast is normally one - five years.
- 12. Long Range Forecasts Long-term forecasts are for major strategic decisions to be taken within an organization, and they very much relate to resource implications. They are, therefore, concerned more with general trends, and in the light of these trends, attempt to predict sales over periods greater than two years. In some strategic, heavily capitalized industries, predictions might be needed for a decade or more.
- 14. TIME SERIES METHODS Moving average Simple moving average Weighted moving average Exponential smoothing Method
- 15. SIMPLE MOVING AVERAGE A simple moving average (SMA) is an arithmetic moving average calculated by adding recent closing prices and then dividing that by the number of time periods in the calculation average. A simple, or arithmetic, moving average that is calculated by adding the closing price of the security for a number of time periods and then dividing this total by that same number of periods.
- 17. Weighted Moving Average A Weighted Moving Average puts more weight on recent data and less on past data. This is done by multiplying each bar’s price by a weighting factor. Because of its unique calculation, WMA will follow prices more closely than a corresponding Simple Moving Average. The WMA to help determine trend direction. It could be an indication to buy when prices dip near or just below the WMA. It could be an indication to sell when prices rally towards or just above the WMA.
- 19. Exponential Smoothing Method Exponential smoothing is a rule of thumb technique for smoothing time series data using the exponential window function. It is an easily learned and easily applied procedure for making some determination based on prior assumptions by the user, such as seasonality. Exponential smoothing is often used for analysis of time-series data.
- 21. CONCLUSION Precise forecasting is almost impossible because of many factors which are difficult to model. Hence, approximate estimates forms the basis of Production Planning.
- 22. THANK YOU