## Operations Management Chapter 3 Forecasting

associative model

Forecasting technique that uses explanatory variables to predict future demand.

bias

Persistent tendency for forecasts to be greater or less than the actual values of a time series.

centered moving average

A moving average positioned at the center of the data that were used to compute it.

control chart

A visual tool for monitoring forecast errors.

correlation

A measure of the strength and direction of relationship between two variables.

cycle

Wavelike variations lasting more than one year.

Delphi method

An iterative process in which managers and staff complete a series of questionnaires, each developed from the previous one, to achieve a consensus forecast.

error

Difference between the actual value and the value that was predicted for a given period.

exponential smoothing

A weighted averaging method based on previous forecast plus a percentage of the forecast error.

forecast

A statement about the future value of a variable of interest.

irregular variation

Caused by unusual circumstances, not reflective of typical behavior.

judgmental forecasts

Forecasts that use subjective inputs such as opinions from consumer surveys, sales staff, managers, executives, and experts.

least squares line

Minimizes the sum of the squared vertical deviations around the line.

linear trend equation

Ft = a + bt, used to develop forecasts when trend is present.

mean absolute deviation (MAD)

The average absolute forecast error.

mean absolute percent error (MAPE)

The average absolute percent error.

mean squared error (MSE)

The average of squared forecast errors.

moving average

Technique that averages a number of recent actual values, updated as new values become available.

naive forecast A forecast for any period that equals the previous period’s actual value.

A forecast for any period that equals the previous period’s actual value.

predictor variables

Variables that can be used to predict values of the variable of interest.

random variations

Residual variations after all other behaviors are accounted for.

regression

Technique for fitting a line to a set of points.

seasonal relative

Percentage of average or trend.

seasonal variations

Regularly repeating movements in series values that can be tied to recurring events.

seasonality

Short-term regular variations related to the calendar or time of day.

standard error of estimate

A measure of the scatter of points around a regression line.

time series

A time-ordered sequence of observations taken at regular intervals.

time-series forecasts

Forecasts that project patterns identified in recent time-series observations

tracking signal

The ratio of cumulative forecast error to the corresponding value of MAD, used to monitor a forecast.

trend

A long-term upward or downward movement in data.

trend-adjusted exponential smoothing

Variation of exponential smoothing used when a time series exhibits a linear trend.

weighted average

More recent values in a series are given more weight in computing a forecast.

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