How to use least squares regression in forecasting
During Service and Sales subject we were working on forecasting. One of the techniques used was least squares regression. I have prepared a video explaining how to use excel spreadsheet and how to interpret all different parameters.
Excel functions translations
You can find below a useful translation of every Excel function from Spanish to German:
Spanish  German 
–  – 
ABRIR.ARCHIVO  DATEI.ÖFFNEN 
ABRIRA  DÖFFNEN 
ABS  ABS 
ACOS  ARCCOS 
ACOSH  ARCCOSHYP 
AGREGAR.BARRA  MENÜLEISTE.EINFÜGEN 
AGREGAR.BARRA.HERRAMIENTAS  SYMBOLLEISTE.EINFÜGEN 
AGREGAR.COMANDO  BEFEHL.EINFÜGEN 
AGREGAR.MENU  MENÜ.EINFÜGEN 
AGRUPAR  GRUPPIEREN 
AHORA  JETZT 
ALEATORIO  ZUFALLSZAHL 
AÑO  JAHR 
APL.TITULO  ANW.TITEL 
ARCHIVOS  DATEIEN 
AREAS  BEREICHE 
ARGUMENTO  ARGUMENT 
ASC  ASC 
ASENO  ARCSIN 
ASENOH  ARCSINHYP 
ATAN  ARCTAN 
ATAN2  ARCTAN2 
ATANH  ARCTANHYP 
AYUDA  HILFE 
BDCONTAR  DBANZAHL 
BDCONTARA  DBANZAHL2 
BDDESVEST  DBSTDABW 
BDDESVESTP  DBSTDABWN 
BDEXTRAER  DBAUSZUG 
BDMAX  DBMAX 
BDMIN  DBMIN 
BDPRODUCTO  DBPRODUKT 
BDPROMEDIO  DBMITTELWERT 
BDSUMA  DBSUMME 
BDVAR  DBVARIANZ 
BDVARP  DBVARIANZEN 
BINOM.CRIT  KRITBINOM 
BUSCAR  VERWEIS Read more… 
Multistage inventory control
Inventory control should full fill the following objectives:
 To determine the optimal inventory policy for the whole system.
 To keep the cumulative production line close to cumulative demand line.
Multistage inventory is also known as MultiEchelon system, where we have different layers of inventory:
Managing inventories also implies to accept a level of uncertainty at different stages of the planning process. According to Galbraith uncertainty is
the difference between the amount of information required to perform a task and the amount of information already possessed.
There are different algorithms to manage multistage inventories:

Kacprzyk and Staniewski (1982):
 Infinite planning horizon.
 Fuzzy system, with fuzzy inventory levels, inputs and outputs.
 Algorithm that determines an optimal strategy to determine the reinstatement of existent inventory levels.

Park (1987):
 Economic Order Quantity (EOQ) model from a fuzzy set theory perspective.
 The order and inventory costs are modelled by trapezoidal fuzzy numbers.
 Rules to transform the fuzzy cost information in precise inputs for the EOQ model.

Hojati (2004):
 Probabilisticparameter EOQ model
 Fuzzy parameter EOQ model
 Simulation to compare the results.

Porter et al. (1995):
 Genetic algorithm to solve an inventoryproductiondistribution problem.
 The objective is to determine optimal stock levels, production quantities, and transportation quantities to minimize total system costs.

Samanta and AlAraimi (2001):
 Based on fuzzy logic for inventory control.
 Periodic revision of the inventory with a variable order quantity.
 Combines fuzzy logic with a proportionalintegralderivative (PID) control algorithm.
 Product inventory at the desired level.
 Demand variations and the dynamics of the production system.
One of the main conclusions is that there is an intrinsic relation between inventory contrl/management and the production system. Different production systems require different inventory systems.
Definitions:
 Inventory inaccuracy: The discrepancy between the actual and the estimate inventory
Keywords:
 Control: Centralized or Decentralized
 Lot size
 Reorder point logic
 Safety stock: Large or small
 Demand pattern
 Ordering pattern
 Inventory cycles
Inventory planning hierarchy
Sources:
 Mula. J., R. Poler, J.P. GarcíaSabater, and F.C. Lario, 2006, “Models for production planning under uncertainty: A review,” International Journal of Production Economics, Vol. 103, 271–285.
 Premises Inventory control in a distribution environment Information replaces inventory “DRP is simply the application to distribution inventories” MIT Open Course Ware
 Inventory systems in practice – MIT Open Course Ware
 Stanley B. Gershwin, “Singlestage, multiple part type, MTS production”, MIT Open Course Ware
 Stanley B. Gershwin, “MultiStage Control and Scheduling”, MIT Open Course Ware
Basic inventory principles
First it’s important to remarck that inventory control is an inexact science. This will give us an introduction to basic inventory principles:
Importance of inventory costs.
What are the typical costs involved? (inventory cost drivers):
 Facility costs
 Human capital: The cost of labor to maintain storage
 Finance costs.
 Management costs.
 Procurement costs: costs of purchasing.
 Inventory turnover.
 Sock accuracy
 Service levels: critical goods, non critical goods, scheduled delivery
Price, Value and Cost
By reading Philip Kotler Principles of Marketing, we can extract 3 definitions that can help on this topic:
Price:
The amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service.
Click on the image to enlarge
Cost:
Costs set the floor for the price that the company can charge for its product. The company wants to charge a price that both covers all its costs for producing, distributing and selling the product, and delivers a fair rate of return for its effort and risk. There are different classifications of costs. The more general one is the one that defines fiexed costs and variable costs. Fixe costs do not vary with production or sales level while variable costs vary directly with the levelo of production.
Value:
Buyers’ perceptions of a product value.
Defining prices:
Usually a combination of the 3 previous concepts is used to determine the price of a product. This concept should consider:
 Product costs.
 Competitors’ price and other external and internal factors.
 Consumer perceptions of value.
According to that we can define 2 main pricing strategies:
 Cost based pricing: Product driven process. The company designs what it considers to be a good product, totals de costs of making the product and sets a price that covers cots plus a target profit.
 Valuebased pricing: Customer driven process. The company sets its target price based on customer perceptions of the product value. The targeted value and price then drive decisions about product design and what costs can be incurred. As a result pricing begins with analysing consumer needs and value perceptions and a price is set to match consumers’ perceived value
Soutvr: Philip Kotler – Principles of Marketing, 3rd European Edition. p. 587
On the next video, we can see an interesting lecture from Philip Kotler at the London Business Forum where he states that:
Our job is to create, communicate and deliver value to a target market at a profit.
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