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2 Forecasting logistics requirements
2.1 Introduction2.2 Qualitative methods2.3 Quantitative methods2.4 Data preprocessing2.5 Choice of the forecasting method2.6 Advanced forecasting method2.7 Accuracy measure and forecasting monitoring2.8 Interval forecasts2.9 Case study: Forecasting methods at Adriatica Accumulatori
2.10 Case study: Sales forecasting at Orlea2.11 Questions and problems
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 1 / 9
2 Forecasting logistics requirements Introduction
Forecasting- Attempt to determine in advance the most likely outcome of
an uncertain variable;- planning and controlling logistics systems need predictions
for the level of future economic activities because of thetime lag in matching supply to demand;
- decisions made before some data are known:> facility location;> production scheduling;> inventory management;> transportation planning;
- logistics requirements to be predicted include:> customer demand;> raw material prices;> labour costs;> lead times.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 2 / 9
2 Forecasting logistics requirements Introduction
Forecasting- Attempt to determine in advance the most likely outcome of
an uncertain variable;- planning and controlling logistics systems need predictions
for the level of future economic activities because of thetime lag in matching supply to demand;
- decisions made before some data are known:> facility location;> production scheduling;> inventory management;> transportation planning;
- logistics requirements to be predicted include:> customer demand;> raw material prices;> labour costs;> lead times.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 2 / 9
2 Forecasting logistics requirements Introduction
Forecasting- Attempt to determine in advance the most likely outcome of
an uncertain variable;- planning and controlling logistics systems need predictions
for the level of future economic activities because of thetime lag in matching supply to demand;
- decisions made before some data are known:> facility location;> production scheduling;> inventory management;> transportation planning;
- logistics requirements to be predicted include:> customer demand;> raw material prices;> labour costs;> lead times.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 2 / 9
2 Forecasting logistics requirements Introduction
Forecasting- Attempt to determine in advance the most likely outcome of
an uncertain variable;- planning and controlling logistics systems need predictions
for the level of future economic activities because of thetime lag in matching supply to demand;
- decisions made before some data are known:> facility location;> production scheduling;> inventory management;> transportation planning;
- logistics requirements to be predicted include:> customer demand;> raw material prices;> labour costs;> lead times.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 2 / 9
2 Forecasting logistics requirements Introduction
Forecasting- Attempt to determine in advance the most likely outcome of
an uncertain variable;- planning and controlling logistics systems need predictions
for the level of future economic activities because of thetime lag in matching supply to demand;
- decisions made before some data are known:> facility location;> production scheduling;> inventory management;> transportation planning;
- logistics requirements to be predicted include:> customer demand;> raw material prices;> labour costs;> lead times.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 2 / 9
2 Forecasting logistics requirements Introduction
Forecasting- Attempt to determine in advance the most likely outcome of
an uncertain variable;- planning and controlling logistics systems need predictions
for the level of future economic activities because of thetime lag in matching supply to demand;
- decisions made before some data are known:> facility location;> production scheduling;> inventory management;> transportation planning;
- logistics requirements to be predicted include:> customer demand;> raw material prices;> labour costs;> lead times.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 2 / 9
2 Forecasting logistics requirements Introduction
Forecasting- Attempt to determine in advance the most likely outcome of
an uncertain variable;- planning and controlling logistics systems need predictions
for the level of future economic activities because of thetime lag in matching supply to demand;
- decisions made before some data are known:> facility location;> production scheduling;> inventory management;> transportation planning;
- logistics requirements to be predicted include:> customer demand;> raw material prices;> labour costs;> lead times.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 2 / 9
2 Forecasting logistics requirements Introduction
Forecasting- Attempt to determine in advance the most likely outcome of
an uncertain variable;- planning and controlling logistics systems need predictions
for the level of future economic activities because of thetime lag in matching supply to demand;
- decisions made before some data are known:> facility location;> production scheduling;> inventory management;> transportation planning;
- logistics requirements to be predicted include:> customer demand;> raw material prices;> labour costs;> lead times.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 2 / 9
2 Forecasting logistics requirements Introduction
Forecasting- Attempt to determine in advance the most likely outcome of
an uncertain variable;- planning and controlling logistics systems need predictions
for the level of future economic activities because of thetime lag in matching supply to demand;
- decisions made before some data are known:> facility location;> production scheduling;> inventory management;> transportation planning;
- logistics requirements to be predicted include:> customer demand;> raw material prices;> labour costs;> lead times.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 2 / 9
2 Forecasting logistics requirements Introduction
Forecasting- Attempt to determine in advance the most likely outcome of
an uncertain variable;- planning and controlling logistics systems need predictions
for the level of future economic activities because of thetime lag in matching supply to demand;
- decisions made before some data are known:> facility location;> production scheduling;> inventory management;> transportation planning;
- logistics requirements to be predicted include:> customer demand;> raw material prices;> labour costs;> lead times.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 2 / 9
2 Forecasting logistics requirements Introduction
Forecasting- Attempt to determine in advance the most likely outcome of
an uncertain variable;- planning and controlling logistics systems need predictions
for the level of future economic activities because of thetime lag in matching supply to demand;
- decisions made before some data are known:> facility location;> production scheduling;> inventory management;> transportation planning;
- logistics requirements to be predicted include:> customer demand;> raw material prices;> labour costs;> lead times.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 2 / 9
2 Forecasting logistics requirements Introduction
Forecasting- Attempt to determine in advance the most likely outcome of
an uncertain variable;- planning and controlling logistics systems need predictions
for the level of future economic activities because of thetime lag in matching supply to demand;
- decisions made before some data are known:> facility location;> production scheduling;> inventory management;> transportation planning;
- logistics requirements to be predicted include:> customer demand;> raw material prices;> labour costs;> lead times.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 2 / 9
2 Forecasting logistics requirements Introduction
Forecasting decision areas
Decision area Forecast
Purchasing Price of raw materials, components and semi-finished goodsAvailability of raw materials, components and semi-finished goods
Facility location Fixed location costsVariable location costs
Demand of the logistic nodes to be served
Inventory Picking rate of the products in the warehouseInventory costs
Distribution Travel timesCustomer demand (both location and time pattern)
Table 1: Main forecasts required by logistics systems planning andcontrol.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 3 / 9
2 Forecasting logistics requirements Introduction
Forecasting based on some hypotheses
- No forecasting method can be deemed to be superior toothers in every respect;
- historical data must show some degree of regularity;- historical data pattern must remain nearly the same in the
future or...- data entries must depend to some extent on the past values
of a set of variables.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 4 / 9
2 Forecasting logistics requirements Introduction
Forecasting based on some hypotheses
- No forecasting method can be deemed to be superior toothers in every respect;
- historical data must show some degree of regularity;- historical data pattern must remain nearly the same in the
future or...- data entries must depend to some extent on the past values
of a set of variables.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 4 / 9
2 Forecasting logistics requirements Introduction
Forecasting based on some hypotheses
- No forecasting method can be deemed to be superior toothers in every respect;
- historical data must show some degree of regularity;- historical data pattern must remain nearly the same in the
future or...- data entries must depend to some extent on the past values
of a set of variables.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 4 / 9
2 Forecasting logistics requirements Introduction
Forecasting based on some hypotheses
- No forecasting method can be deemed to be superior toothers in every respect;
- historical data must show some degree of regularity;- historical data pattern must remain nearly the same in the
future or...- data entries must depend to some extent on the past values
of a set of variables.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 4 / 9
2 Forecasting logistics requirements Introduction
Long-term forecasts
- Span a time horizon from one to five years;- predictions for longer time periods unreliable (political and
technological issues come into play);- used for deciding whether:
> a new item should be put on the market;> an old one should be withdrawn;
- often generated for a whole group of commodities (orservices) rather than for a single item (or service);
- sector forecasts are more common than corporate ones.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 5 / 9
2 Forecasting logistics requirements Introduction
Long-term forecasts
- Span a time horizon from one to five years;- predictions for longer time periods unreliable (political and
technological issues come into play);- used for deciding whether:
> a new item should be put on the market;> an old one should be withdrawn;
- often generated for a whole group of commodities (orservices) rather than for a single item (or service);
- sector forecasts are more common than corporate ones.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 5 / 9
2 Forecasting logistics requirements Introduction
Long-term forecasts
- Span a time horizon from one to five years;- predictions for longer time periods unreliable (political and
technological issues come into play);- used for deciding whether:
> a new item should be put on the market;> an old one should be withdrawn;
- often generated for a whole group of commodities (orservices) rather than for a single item (or service);
- sector forecasts are more common than corporate ones.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 5 / 9
2 Forecasting logistics requirements Introduction
Long-term forecasts
- Span a time horizon from one to five years;- predictions for longer time periods unreliable (political and
technological issues come into play);- used for deciding whether:
> a new item should be put on the market;> an old one should be withdrawn;
- often generated for a whole group of commodities (orservices) rather than for a single item (or service);
- sector forecasts are more common than corporate ones.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 5 / 9
2 Forecasting logistics requirements Introduction
Long-term forecasts
- Span a time horizon from one to five years;- predictions for longer time periods unreliable (political and
technological issues come into play);- used for deciding whether:
> a new item should be put on the market;> an old one should be withdrawn;
- often generated for a whole group of commodities (orservices) rather than for a single item (or service);
- sector forecasts are more common than corporate ones.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 5 / 9
2 Forecasting logistics requirements Introduction
Long-term forecasts
- Span a time horizon from one to five years;- predictions for longer time periods unreliable (political and
technological issues come into play);- used for deciding whether:
> a new item should be put on the market;> an old one should be withdrawn;
- often generated for a whole group of commodities (orservices) rather than for a single item (or service);
- sector forecasts are more common than corporate ones.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 5 / 9
2 Forecasting logistics requirements Introduction
Long-term forecasts
- Span a time horizon from one to five years;- predictions for longer time periods unreliable (political and
technological issues come into play);- used for deciding whether:
> a new item should be put on the market;> an old one should be withdrawn;
- often generated for a whole group of commodities (orservices) rather than for a single item (or service);
- sector forecasts are more common than corporate ones.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 5 / 9
2 Forecasting logistics requirements Introduction
Long-term forecasts
- Span a time horizon from one to five years;- predictions for longer time periods unreliable (political and
technological issues come into play);- used for deciding whether:
> a new item should be put on the market;> an old one should be withdrawn;
- often generated for a whole group of commodities (orservices) rather than for a single item (or service);
- sector forecasts are more common than corporate ones.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 5 / 9
2 Forecasting logistics requirements Introduction
Medium-term forecasts
- Extend over a time period ranging from a few months to oneyear;
- used for tactical logistical decisions, such as:> setting annual production and distribution plans;> inventory management;> slot allocation in warehouses.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 6 / 9
2 Forecasting logistics requirements Introduction
Medium-term forecasts
- Extend over a time period ranging from a few months to oneyear;
- used for tactical logistical decisions, such as:> setting annual production and distribution plans;> inventory management;> slot allocation in warehouses.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 6 / 9
2 Forecasting logistics requirements Introduction
Medium-term forecasts
- Extend over a time period ranging from a few months to oneyear;
- used for tactical logistical decisions, such as:> setting annual production and distribution plans;> inventory management;> slot allocation in warehouses.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 6 / 9
2 Forecasting logistics requirements Introduction
Medium-term forecasts
- Extend over a time period ranging from a few months to oneyear;
- used for tactical logistical decisions, such as:> setting annual production and distribution plans;> inventory management;> slot allocation in warehouses.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 6 / 9
2 Forecasting logistics requirements Introduction
Medium-term forecasts
- Extend over a time period ranging from a few months to oneyear;
- used for tactical logistical decisions, such as:> setting annual production and distribution plans;> inventory management;> slot allocation in warehouses.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 6 / 9
2 Forecasting logistics requirements Introduction
short-term forecasts
- Cover a time interval ranging from a few days to severalweeks;
- employed to schedule and reschedule resources in order tomeet medium-term production and distribution targets;
- as service requests are received, there is less need forforecasts;
- forecasts for a shorter time interval (a few hours or a singleday) are quite uncommon.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 7 / 9
2 Forecasting logistics requirements Introduction
short-term forecasts
- Cover a time interval ranging from a few days to severalweeks;
- employed to schedule and reschedule resources in order tomeet medium-term production and distribution targets;
- as service requests are received, there is less need forforecasts;
- forecasts for a shorter time interval (a few hours or a singleday) are quite uncommon.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 7 / 9
2 Forecasting logistics requirements Introduction
short-term forecasts
- Cover a time interval ranging from a few days to severalweeks;
- employed to schedule and reschedule resources in order tomeet medium-term production and distribution targets;
- as service requests are received, there is less need forforecasts;
- forecasts for a shorter time interval (a few hours or a singleday) are quite uncommon.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 7 / 9
2 Forecasting logistics requirements Introduction
short-term forecasts
- Cover a time interval ranging from a few days to severalweeks;
- employed to schedule and reschedule resources in order tomeet medium-term production and distribution targets;
- as service requests are received, there is less need forforecasts;
- forecasts for a shorter time interval (a few hours or a singleday) are quite uncommon.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 7 / 9
2 Forecasting logistics requirements Introduction
Role of logistician (1/2)
- Medium- and long-term forecasts are hardly ever left to thelogistician;
- assigned to marketing managers who try to influenceforecasts.Example. Launch of an advertising campaign for thoseitems whose sales are in decline.
- Logistician often produces short-term forecasts.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 8 / 9
2 Forecasting logistics requirements Introduction
Role of logistician (1/2)
- Medium- and long-term forecasts are hardly ever left to thelogistician;
- assigned to marketing managers who try to influenceforecasts.Example. Launch of an advertising campaign for thoseitems whose sales are in decline.
- Logistician often produces short-term forecasts.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 8 / 9
2 Forecasting logistics requirements Introduction
Role of logistician (1/2)
- Medium- and long-term forecasts are hardly ever left to thelogistician;
- assigned to marketing managers who try to influenceforecasts.Example. Launch of an advertising campaign for thoseitems whose sales are in decline.
- Logistician often produces short-term forecasts.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 8 / 9
2 Forecasting logistics requirements Introduction
Role of logistician (1/2)
- Medium- and long-term forecasts are hardly ever left to thelogistician;
- assigned to marketing managers who try to influenceforecasts.Example. Launch of an advertising campaign for thoseitems whose sales are in decline.
- Logistician often produces short-term forecasts.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 8 / 9
2 Forecasting logistics requirements Introduction
Role of logistician (2/2)
ArvesArves, an American company headquartered in Kansas City,produces electronic games. In 2001, in order to counter thedecline in sales expected for the subsequent year, which wouldhave a serious economic-financial consequence, salesmanagement has considered the possibility of increasing thecompany’s market share by 3%, by means of the followingactions:
- reducing the retail price by 15%;- Internet sales promotions through the ‘pay-per-click’ option.
G. Ghiani, G. Laporte, R. Musmanno Introduction to Logistics System Management © John Wiley & Sons, Ltd 9 / 9
