The Presentation contains different methods of forecasting used in Production Planning

1. FORECASTING
AND
METHODS OF FORECASTING IN
PRODUCTION PLANNING
Submitted By: Bhanu Arora

2. PRODUCTION PLANNING
 Production planning involves management
decisions on the resources that the firm will require
for its manufacturing operations and the selection of
these resources to produce the desired goods at
the appropriate time and at the least possible cost.

3. OBJECTIVES OF PRODUCTION PLANNING
 To determine the requirements of men, material and
equipment.
 Arranging production schedules according to the
needs of marketing demand.
 Arranging various inputs at a right time and in right
quantity.
 Making most economical use of various inputs.
 To achieve coordination among various
departments relating to production.
 To make all arrangements to remove possible
obstacles in the way of smooth production.
 To achieve economy in production cost and time.

4. PRODUCTION PLANNING AND CONTROL
 Production planning and control is the co-ordination
of series of functions according to a plan which will
economically utilize the plant facilities and regulate
the orderly movement of goods through the entire
manufacturing cycle from the procurement of all
materials to the shipping of finished goods at a
predetermined rate.

5. CHARACTERISTICS OF PRODUCTION
PLANNING AND CONTROL
 It is the planning and control of manufacturing
process in an enterprise.
 All types of inputs like materials, men, machines
are efficiently used for maintaining efficiency of
manufacturing process.
 Various factors of production are integrated to use
them efficiently and economically.
 The manufacturing process is organized in such a
way that none of the work centers is either
overworked or under worked.

6. FORECASTING
Contents to Forecasting are:
 Introduction for Forecasting
 The strategic role of forecasting
 Components of forecasting demand
 Time series methods Forecasting

7. FORECASTING
 Forecasting is essential for number of planning
decisions and often provides a valuable input on which
operations of the business enterprises depend.
 Forecasting is a process of estimating a future event by
casting forward past data. The past data are
systematically combined in a predetermined way to
obtain the estimate of the future.
 Prediction is a process of estimating a future event
based on subjective considerations other than just past
data; these subjective considerations need not be
combined in a predetermined way.

8. THE STRATEGIC ROLE OF
FORECASTING
 Supply chain Management
 Quality Management
 Strategic planning

9. COMPONENTS OF FORECASTING
DEMAND
 Time frame
 Short Range Forecasts
 Medium Range Forecasts
 Long Range Forecasts

10. Short Range Forecasts
 Short-term forecasts are usually made for tactical
reasons that include production planning and
control, short-term cash requirements and
adjustments that need to be made for seasonal
sales fluctuations.
 Such forecasts are for periods of less than one
year, with a normal range between one and three
months.

11. Medium Range Forecasts
 These are made for minor strategic decisions in
connection with the operation of the business. They are
important in the area of business budgeting for the
operating budget, and it is from this forecast that
company budgets are built up.
 Incorrect forecasting can have serious implications for
the rest of the organization, for if it turns out to be over-
optimistic, the organization will be left with unsold stock
and will have overspent on production.
 The time period for a medium-term forecast is normally
one - five years.

12. Long Range Forecasts
 Long-term forecasts are for major strategic
decisions to be taken within an organization, and
they very much relate to resource implications.
 They are, therefore, concerned more with general
trends, and in the light of these trends, attempt to
predict sales over periods greater than two years.
In some strategic, heavily capitalized industries,
predictions might be needed for a decade or more.

13. FORECASTING PROCESS:

14. TIME SERIES METHODS
 Moving average
 Simple moving average
 Weighted moving average
 Exponential smoothing Method

15. SIMPLE MOVING AVERAGE
 A simple moving average (SMA) is an
arithmetic moving average calculated by adding
recent closing prices and then dividing that by the
number of time periods in the calculation average.
 A simple, or arithmetic, moving average that is
calculated by adding the closing price of the
security for a number of time periods and then
dividing this total by that same number of periods.

17. Weighted Moving Average
 A Weighted Moving Average puts more weight on
recent data and less on past data. This is done by
multiplying each bar’s price by a weighting factor.
Because of its unique calculation, WMA will follow
prices more closely than a corresponding Simple
Moving Average.
 The WMA to help determine trend direction. It could
be an indication to buy when prices dip near or just
below the WMA. It could be an indication to sell
when prices rally towards or just above the WMA.

19. Exponential Smoothing Method
 Exponential smoothing is a rule of thumb technique
for smoothing time series data using the
exponential window function.
 It is an easily learned and easily applied procedure
for making some determination based on prior
assumptions by the user, such as seasonality.
 Exponential smoothing is often used for analysis of
time-series data.

20. CALCULATION METHOD

21. CONCLUSION
 Precise forecasting is almost impossible because of
many factors which are difficult to model. Hence,
approximate estimates forms the basis of
Production Planning.

22. THANK YOU