1-9.5 Forecasting

Forecasting is used to estimate the conditions that will exist over a future period. There are long-, medium-, and short-term forecasts:

Historical data are widely used to forecast, based on the assumption that what has happened in the past will happen again in the future. Similarly, demand from January can be used to forecast demand in February; if it is assumed that demand varies little from month to month. This assumption is realistic if demand is seasonal and trends vary nominally; however, such forecasts do not take into account random fluctuation. Common forecasting techniques that average historical demand, including moving averages, exponential smoothing, and seasonal forecasts, diminish some effects of random variation and, in combination with other techniques, are used to establish replenishment and repair plans.