King Abdulaziz University Faculty of Engineering Industrial Engineering Dept.

1. King Abdulaziz UniversityFaculty of EngineeringIndustrial Engineering Dept. IE 436 Dynamic Forecasting

2. CHAPTER 1 Introduction to Forecasting • Some Techniques: In the nineteenth century. • Some Others: only recently. • Forecasting Process: Continue to grow. • Consumers of forecasts (Managers): More attention to Forecasting. The History of Forecasting

3. Is Forecasting Necessary? • All organizations operate in uncertainty. • Decisions affecting the future must be made. • Judgments are not so accurate. • World has always been changing. • Competition has become more keen.

4. Who needs forecasts ? • All types of organizations: (large-small, private-public). • All functional lines: (finance, marketing, personnel, production areas)

5. Some Questions that need forecasting • Increase advertising by 10% : sales? • Over the next 2 years : revenues? • How many units might we sell? • To explain sales variability : factors to consider? • Loan balance over the next 10 years?

6. Types of Forecasts • Time horizon: (long, intermediate, short). • Level of details: (micro-macro). • Methods used: (Quantitative-qualitative). Note: judgment must be used along with quantitative forecasting procedures.

7. Range of Forecasting

8. Forecasting Steps 1. Problem Formulation and Data collection. 2. Data manipulation and cleaning. 3. Model building and evaluation. 4. Model implementation (the actual Forecast). 5. Forecast evaluation.

9. Problem Formulation 1 2 3 4 5 Data Collection Data Reduction Data Manipulation and cleaning Model Building Model evaluation ? NO Yes Model implementation (Actual Forecast) Forecast evaluation NO Yes Forecast Updating Forecasting Steps