Outline of Previous LectureChapter 5-Demand Forecasting Part 2Current Lecture Lecture 13Chapter 6- Resource Planning Systems Part 1SCM 3301 1st EditionLecture 8Outline of Previous Lecture Chapter 5-Demand Forecasting Part 2Forecast ErrorThe formula for forecast error, defined as the difference between actual quantity and the forcast-Forecast Error, e(t)=A(t)-F(t)Where e(t)= forecast error for Period tA(t)= actual demand for Period t F(t)= forecast for Period tForecast Inaccuracy Cost Money (Tracking Signal)Positive Bias: Forecast is lower than Demand => Stock-outsNegative Bias: Forecast is higher than Demand => InventoryMeasuring Forecast AccuracySeveral measures of forecasting accuracy follow-- Mean absolute deviation (MAD)- a MAD of 0 indicates the forecast exactly predicted demand- Mean absolute percentage error (MAPE)- provides a perspective of the true magnitude of the forecast error- Running Sum of Forecast Errors (RSFE)- indicates bias in the forecasts or the tendency of a forecast- Mean squared error (MSE)Forecast Accuracy Example, RSFE, MAD, MSE, & MAPECurrent Lecture Lecture 13Chapter 6- Resource Planning Systems Part 1Aggregate Production Planning (Sales & Operations Planning)Organized by Product Family- Chase Production Strategyo Adjusting capacity to match demando Inventory remains constant- Level Production Strategyo Adjusting inventory to react to demando Capacity remains constant- Mixed Production Strategyo Workforce remains constanto Capacity is adjusted in other ways Overtime, additional shifts, subcontracting, and contract workersMaster Production Scheduling Components- Schedule Time Fence (System Nervousness)o Time Fence: Separates Planning Horizon into Firm and Tentative Segmentso Nervousness: Small change upper level (MPS) leads to a large change lower level (MRP)- Available to Promise (ATP) Quantityo The uncommitted portion of the firm’s planned production (or scheduled MPS)o Calculation: Difference between confirmed customer orders and planned production (MPS)- Bill of Materials (BOM)o Engineering document that shows all component parts and subassemblies making up an end item.o Independent Demand: End-item (needs to be forecasted)o Dependent Demand: Component parts & subassemblies (no need to forecast)- Material Requirements Planning (MRP)o Software-based production planning and inventory management system used for computing dependent demand and timing
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