The budget of demand forecasting in one-period seasonal goods production systems - a Bayesian approach Authors: Chih-Ming Lee

Authors: Chih-Ming Lee

Journal: Chiao Da Management Review. Dec. 2004, 24(2): 37-60.

Keywords:Seasonal goods; Demand forecasting; Bayesian approach

Seasonal goods; Demand forecasting; Bayesian approach Abstract: How to accurately predict and satisfy customer needs is very important for a company to survive. In general, the precision of demand forecasting is closely relative to the budget invested in forecasting. In this paper, we develop a single-product and single-period model (a newsboy model) with Bayesian approach to study how the decision-maker in a seasonal goods production system to determine the production quantity and budget invested in demand forecasting. We find that when unit selling price, unit inventory disposal cost, or unit shortage cost is larger, or when unit production cost is appropriate, or when production setup cost is smaller, demand forecasting becomes more important.