Methods Techniques of Production Forecasting
Methods or techniques of production forecasting are depicted below.
Image Credits © Moon Rodriguez.
The models or techniques of production forecasting are listed as follows:
- Brainstorming technique.
- Goal oriented forecast technique.
- Graphic charting technique.
- Matrix technique.
- Nominal group technique (NGT).
- Delphi technique.
- Simple average technique.
Now let's discuss each method or technique of production forecasting.
1. Brainstorming technique
Brainstorming technique is used to forecast demand, especially for new products. In this method, many experts sit together and each expert gives his own idea (forecast) and reason for it. One idea leads to many more ideas. The group of experts will develop much more ideas than one person. Based on these ideas, demand can be forecasted.
2. Goal oriented forecast technique
In this technique, a goal is first fixed. Then the technological developments which are required for achieving that goal is identified. Later, a forecast is made about when these technological developments would take place in the future So, an estimate is made about the timing of these technological developments in an upcoming future. This method is used by large companies, which have their own research and development departments.
3. Graphic charting technique
Graphic charting technique is used to forecast future technological developments by plotting past technological developments on a logarithmic scale. This technique is based on the assumption that knowledge expands. This technique estimate, when the next major (big) technological development is likely to take place.
4. Matrix technique
Matrix is a combination of two or more matters relating to the production process. A matrix is prepared with technological developments, product functions and time factor. Matrix technique is comprehensive. It is flexible and so it can adjust with the changing times. This technique is used only by large companies.
5. Nominal group technique (NGT)
In nominal group technique (NGT), the group members think independently. Each group member contributes his own ideas. This technique does not allow interaction between the group members at an early stage. Interaction takes place only when the ideas are presented by every single member of the group.
6. Delphi technique
Delphi technique is very much similar to the brainstorming technique. The only difference between brainstorming and Delphi technique is that in a Delphi method, group members don't interact personally. Here, such personal interaction is impossible because group members are physically present at different places.
7. Simple average technique
In simple average technique, forecasts are based on the average value for a given period of time.
A simple average (SA) is the average of demand (sales) for all previous periods. The demands of all periods are equally weighted.
SA equals 'Sum of Demands for all periods' divided by 'Number of periods.'
Average calculations are made at different intervals in order to reduce error due to seasonal variations. Instead of taking the simple average of the full year's sales, quarterly averages or monthly averages are taken. This gives realistic trends. Averaging reduces the chances of being misled by gross fluctuations that may take place in any single period. However, if the underlying pattern changes over time, simple averaging will not detect the change.