Operations Management Principles Db 2
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Unit 2 DB
Operations Management
MGT326
Before deciding which technique to select for our division it is essential to understand something about each of these techniques and the criteria for selection. Moving Average, Weighted Moving Average and Exponential Smoothing are short-range techniques and give the forecast only for the next period. (Stevenson, 2007) If longer-term forecasts are needed other techniques such as regression analysis would be required. All three techniques are easy to understand and easy to execute and these criteria do not give any advantage to any one of the techniques. Perhaps the most important factor about these techniques is that they are averaging techniques and smoothing the fluctuations. They do not distinguish between random fluctuations and actual changes and hence, while using these techniques a trade-off needs to be made between smoothing and responsiveness. (Stevenson, 2007)
Moving Average averages a number of recent actual values. The more the number of values the greater the smoothing and the less the number of values the greater the responsiveness. Since this method does not give greater weight to the more recent values, it is slower to respond than the other two techniques. Hence, Moving Average is favored when the process is relatively stable. (Stevenson, 2007)
The Weighted Moving Average is similar to the Moving Average but it gives greater weight to the more recent values. It is to be used when changes are expected in the process. Its drawback