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Ratan Jha
(21 MAY 2008)
Advisor: Dr. Larry Lapide
AgendaBackground
Product Hierarchy
Statistical Forecasting
Results
Recommendations
Jha 21 May 2008 2
Jha 21 May 2008 3
Players: Wireless Inc (Buyer) and Hitec Inc (Seller)
Process: Both collaborate to match demand with supply generate
mutually agreed upon consensus forecast or collaborative forecast
Author's last name(s) XX May 2008 4
How should collaborative forecast information
be used for mitigating demand uncertainty?
AgendaBackground
Product Hierarchy
Statistical Forecasting
Results
Recommendations
Jha 21 May 2008 5
Jha 21 May 2008 6
Family A
Assembl
yBoard CableBase Memor
yRouter Power Family B
Assembl
yBoard FeatureBase Power Cable Switch
Product Family Level
Product Type Level
PID (Product ID) Level
PIDs
PIDs
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AgendaBackground
Product Hierarchy
Statistical Forecasting
Results
Recommendations
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Jha 21 May 2008 9
Periods of Zero Demand between Periods of non-Zero Demand at
PID Level. Also called Intermittent or Erratic Demand Pattern.
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Negligible Periods of Zero Demand at Product Type Level Termed
Continuous Demand (Arbitrary Naming).
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Damped trend model for continuous
demand
20–Period Moving Average for
intermittent demand
Forecast generated both at type level
and PID level
Bottom Up and Top Down forecasting
approach
Root Mean Squared Error(RMSE) as
measure of accuracy
1 2 3 10
Initialization
Parameter Fitting
11 12 13 24
25 26 27 42
Forecasting
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Product Type
PID1 PID2 PID3 PID4
10 8 15 19
52 –
RMSE:12
Forecast At Product Type Level = 56 (RMSE: 10)
Forecast at PID Level
Bottom-Up Approach
Product Type
PID1 PID2 PID3 PID4
56
11 9 16 20
Top Down Approach
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Collaborative forecast at PID level in monthly buckets available
PID level statistical forecast aggregated into monthly buckets
A Hybrid forecast weighted by statistical and collaborative forecast
in any given time period is generated using following equation:
Hybrid Forecast = α* Statistical Forecast + (1-α)*Collaborative Forecast,
where α
is a parameter estimated using optimization techniques
Collaborative forecast at PID level in monthly buckets available
PID level statistical forecast aggregated into monthly buckets
A Hybrid forecast weighted by statistical and collaborative forecast
in any given time period is generated using following equation:
Hybrid Forecast = α* Statistical Forecast + (1-α)*Collaborative Forecast,
where α
is a parameter estimated using optimization techniques
AgendaBackground
Product Hierarchy
Statistical Forecasting
Results
Recommendations
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Collaborative Forecastworst among the three
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PID Collaborative RMSE Statistical RMSE Hybrid RMSE1 2.52 5.92 2.52 (α
= 0)2 9.33 7.39 7.39 (α
= 1)3 15.64 11.76 11.31 (α
= 0.77)4 36.18 11.43 11.43 (α
= 1)5 46.74 7.87 7.87 (α
= 1)6 339.89 65.39 26.48 (α
= 0.93)7 1.15 3.11 0.90 (α
= 0.20)8 2.52 4.36 2.52 (α
= 0)9 4.24 1.00 1.00 (α
= 1)10 0.00 0.00 0.00 (α
= 1)11 0.00 0.00 0.00 (α
= 0)12 18.63 21.24 18.63 (α
= 0)13 10.25 12.38 10.25 (α
= 0)14 32.54 24.32 24.09 (α
= 0.87)15 48.58 37.22 36.72 (α
= 0.84)16 28.91 25.42 25.42 (α
= 1)17 6.48 10.53 6.48 (α
= 0)18 17.00 21.66 17.00 (α
= 0)19 22.65 9.55 9.55 (α
= 1)
Collaborative Wins
Statistical Wins Hybrid Wins
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Collaborative Forecastworst among the three
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PID Collaborative RMSE Statistical RMSE Hybrid RMSE1 0.00 0.00 0.00 (α
= 0)2 2.31 2.04 1.82 (α
= 0.61)3 2.89 2.61 2.28 (α
= 0.58)4 19.69 3.83 3.83 (α
= 1)5 48.91 26.48 26.48 (α
= 1)6 4.62 4.71 4.56 (α
= 0.38)7 17.22 10.64 10.40 (α
= 0.86)8 1.15 1.31 1.01 (α
= 0.40)9 2.31 2.29 1.82 (α
= 0.51)10 25.36 6.55 6.55 (α
= 1)11 6.93 11.22 5.46 (α
= 0.30)12 30.31 5.57 5.57 (α
= 1)13 2.38 2.14 1.66 (α
= .56)14 5.29 7.06 5.25 (α
= 0.12)15 6.00 7.92 7.14 (α
= 0.84)16 20.91 15.65 15.65 (α
= 1)17 4.62 3.67 3.67 (α
= 1)18 285.12 23.12 23.12 (α
= 1)19 55.12 41.87 41.87 (α
= 1)20 5.16 4.02 2.91 (α
= 0.61)
Statistical Wins
Hybrid Wins
AgendaBackground
Product Hierarchy
Statistical Forecasting
Results
Conclusions
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ConclusionsThere is value to both statistical and collaborative forecasts.
A bottom-up and top-down approach in statistical forecasting helps to generate more accurate forecasts
In some scenarios application of simple statistical techniques yield better results than application of complex techniques.
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Jha 21 May 2008 21
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