Quiz 10: Judgmental Forecasting and Forecast Adjustments

Business

Answer will vary. One of the possible answers is given below: Delphi method is applied in the forecasting situation for which the pure statistical methods are not possible due to lack of appropriate historical data. Some of the examples are given below: • Sales of a newly manufactured product for the first year • Employment for a new project Potential difficulties and pitfalls that are associated with the Delphi method are given below: • Gathering of exact group of experts related to the project • Overwhelm the biases by a particular expert • Unable to organize for appropriate feedback

a. Compute the combined forecasts of sales produced by taking a simple average of the forecasts produced by Winter's method and the regression model. The general formula for combined forecasts using simple average method is given below: img img Obtain the one-step-ahead combined forecasts using simple average method for the first month. img Thus, the one-step-ahead combined forecasts using simple average method for the first month is img . Obtain the one-step-ahead combined forecasts using simple average method for the second month. img Thus, the one-step-ahead combined forecasts using simple average method for the second month is img . Obtain the one-step-ahead combined forecasts using simple average method for the third month. img Thus, the one-step-ahead combined forecasts using simple average method for the third month is img . Similarly, the combined forecasts of sales produced by Winter's method and the regression method can be calculated. The results of the combined forecasts for all months are tabulated below: img b. Compute the combined forecasts of sales produced by taking a weighted average of the forecasts produced by Winters' method and the regression model. The general formula for combined forecasts using weighted average is obtained below: img img Obtain the one-step-ahead combined forecasts using weighted average method for the first month. img Thus, the one-step-ahead combined forecasts using weighted average method for the first month is img . Obtain the one-step-ahead combined forecasts using weighted average method for the second month. img Thus, the one-step-ahead combined forecasts using weighted average method for the second month is img . Obtain the one-step-ahead combined forecasts using weighted average method for the third month. img Thus, the one-step-ahead combined forecasts using weighted average method for the third month is img . Similarly, the combined forecasts of sales produced by Winters' method and the regression method can be obtained. The results of the combined forecasts for all months are tabulated below: img c. Compute the Mean Absolute Percentage Error ( MAPE ) for the Winters' forecasting method. img The value of the Mean Absolute Percentage Error ( MAPE ) is, img Thus, the Mean Absolute Percentage Error ( MAPE ) for the Winter's forecasting method is img . Compute the Mean Absolute Percentage Error ( MAPE ) for the regression forecasting method. img The value of the Mean Absolute Percentage Error ( MAPE ) is, img Thus, the Mean Absolute Percentage Error ( MAPE ) for the regression forecasting method is img . d. Compute the Mean Absolute Percentage Error ( MAPE ) for the average forecasting method. img The value of the Mean Absolute Percentage Error ( MAPE ) is, img Thus, the Mean Absolute Percentage Error ( MAPE ) for the average forecasting method is img . Compute the Mean Absolute Percentage Error ( MAPE ) for the weighted average forecasting method. img The value of the Mean Absolute Percentage Error ( MAPE ) is, img Thus, the Mean Absolute Percentage Error ( MAPE ) for the weighted average forecasting method is img . Identify the preferable forecasts method based on the Mean Absolute Percentage Error ( MAPE ) measure. From part (b) and (c), it is clear that the simple average and regression forecasts methods are preferable, because the error measures by simple average forecasts and regression forecasts is img and img is comparatively lesser than the other forecasts methods.

Identify a method that can be suggested to the Goldens in utilizing the expertise of their friends. From the given case, it is clear that Sue and Bill Golden had conducted a series of three groups and analyzed about atmosphere and motif of the restaurant. However, they could not get any consensus on the same. Moreover, they had considerable discussions and have some opinions on their own. In addition, they have a number of expert friends and associates and have to find some way to use their expertise. By applying the Delphi method , they can use their friends and associates knowledge. Sue and Bill Golden can first provide with a short description about the project, the idea about the atmosphere and motif can be raised to their friends and request them to design the restaurant. After receiving the design, Sue and Bill can analyze the design of the restaurant and mail back their descriptions to each of the friends. In addition, they can request their friends to re-design based on the comments given. This process can be continued until there are no changes in the design.