The Fourteen Points (1918) – Woodrow Wilson As World War.docx

The Fourteen Points (1918) – Woodrow Wilson


As World War I drew to a close, Woodrow Wilson issued these Fourteen Points as a roadmap for
a just and permanent peace. He proposed that European nations, including Belgium and France,
be restored to their former condition. He also advised against punishing Germany with overly
harsh measures. Wilson advocated progressive ideals of democracy, transparent and open
diplomacy, and free trade as the proper basis for American foreign policy. Perhaps most
surprising to the citizens at the time, his fifth point introduced the principle of national
sovereignty for colonial peoples.


8 January, 1918:
President Woodrow Wilson's Fourteen Points

It will be our wish and purpose that the processes of peace, when they are begun, shall be
absolutely open and that they shall involve and permit henceforth no secret understandings of
any kind. The day of conquest and aggrandizement is gone by; so is also the day of secret
covenants entered into in the interest of particular governments and likely at some unlooked-for
moment to upset the peace of the world. It is this happy fact, now clear to the view of every
public man whose thoughts do not still linger in an age that is dead and gone, which makes it
possible for every nation whose purposes are consistent with justice and the peace of the world to
avow nor or at any other time the objects it has in view.

We entered this war because violations of right had occurred which touched us to the quick and
made the life of our own people impossible unless they were corrected and the world secure once
for all against their recurrence. What we demand in this war, therefore, is nothing peculiar to
ourselves. It is that the world be made fit and safe to live in; and particularly that it be made safe
for every peace-loving nation which, like our own, wishes to live its own life, determine its own
institutions, be assured of justice and fair dealing by the other peoples of the world as against
force and selfish aggression. All the peoples of the world are in effect partners in this interest,
and for our own part we see very clearly that unless justice be done to others it will not be done
to us. The programme of the world's peace, therefore, is our programme; and that programme,
the only possible programme, as we see it, is this:

I. Open covenants of peace, openly arrived at, after which there shall be no private international
understandings of any kind but diplomacy shall proceed always frankly and in the public view.

II. Absolute freedom of navigation upon the seas, outside territorial waters, alike in peace and in
war, except as the seas may be closed in whole or in part by international action for the
enforcement of international covenants.

III. The removal, so far as possible, of all economic barriers and the establishment of an equality
of trade conditions among all the nations consenting to the peace and associating themse ...

1. The Fourteen Points (1918) – Woodrow Wilson


As World War I drew to a close, Woodrow Wilson issued these
Fourteen Points as a roadmap for
a just and permanent peace. He proposed that European nations,
including Belgium and France,
be restored to their former condition. He also advised against
punishing Germany with overly
harsh measures. Wilson advocated progressive ideals of
democracy, transparent and open
diplomacy, and free trade as the proper basis for American
foreign policy. Perhaps most
surprising to the citizens at the time, his fifth point introduced
the principle of national
sovereignty for colonial peoples.


8 January, 1918:
President Woodrow Wilson's Fourteen Points

It will be our wish and purpose that the processes of peace,
when they are begun, shall be
absolutely open and that they shall involve and permit
henceforth no secret understandings of
any kind. The day of conquest and aggrandizement is gone by;
so is also the day of secret
covenants entered into in the interest of particular governments
and likely at some unlooked-for
moment to upset the peace of the world. It is this happy fact,
now clear to the view of every
public man whose thoughts do not still linger in an age that is

2. dead and gone, which makes it
possible for every nation whose purposes are consistent with
justice and the peace of the world to
avow nor or at any other time the objects it has in view.

We entered this war because violations of right had occurred
which touched us to the quick and
made the life of our own people impossible unless they were
corrected and the world secure once
for all against their recurrence. What we demand in this war,
therefore, is nothing peculiar to
ourselves. It is that the world be made fit and safe to live in;
and particularly that it be made safe
for every peace-loving nation which, like our own, wishes to
live its own life, determine its own
institutions, be assured of justice and fair dealing by the other
peoples of the world as against
force and selfish aggression. All the peoples of the world are in
effect partners in this interest,
and for our own part we see very clearly that unless justice be
done to others it will not be done
to us. The programme of the world's peace, therefore, is our
programme; and that programme,
the only possible programme, as we see it, is this:

I. Open covenants of peace, openly arrived at, after which there
shall be no private international
understandings of any kind but diplomacy shall proceed always
frankly and in the public view.

II. Absolute freedom of navigation upon the seas, outside
territorial waters, alike in peace and in
war, except as the seas may be closed in whole or in part by
international action for the
enforcement of international covenants.

3. III. The removal, so far as possible, of all economic barriers and
the establishment of an equality
of trade conditions among all the nations consenting to the
peace and associating themselves for



its maintenance.

IV. Adequate guarantees given and taken that national
armaments will be reduced to the lowest
point consistent with domestic safety.

V. A free, open-minded, and absolutely impartial adjustment of
all colonial claims, based upon a
strict observance of the principle that in determining all such
questions of sovereignty the
interests of the populations concerned must have equal weight
with the equitable claims of the
government whose title is to be determined.

VI. The evacuation of all Russian territory and such a
settlement of all questions affecting Russia
as will secure the best and freest cooperation of the other
nations of the world in obtaining for
her an unhampered and unembarrassed opportunity for the
independent determination of her own
political development and national policy and assure her of a
sincere welcome into the society of
free nations under institutions of her own choosing; and, more
than a welcome, assistance also of
every kind that she may need and may herself desire. The
treatment accorded Russia by her sister
nations in the months to come will be the acid test of their good
will, of their comprehension of
her needs as distinguished from their own interests, and of their

4. intelligent and unselfish
sympathy.

VII. Belgium, the whole world will agree, must be evacuated
and restored, without any attempt
to limit the sovereignty which she enjoys in common with all
other free nations. No other single
act will serve as this will serve to restore confidence among the
nations in the laws which they
have themselves set and determined for the government of their
relations with one another.
Without this healing act the whole structure and validity of
international law is forever impaired.

VIII. All French territory should be freed and the invaded
portions restored, and the wrong done
to France by Prussia in 1871 in the matter of Alsace-Lorraine,
which has unsettled the peace of
the world for nearly fifty years, should be righted, in order that
peace may once more be made
secure in the interest of all.

IX. A readjustment of the frontiers of Italy should be effected
along clearly recognizable lines of
nationality.

X. The peoples of Austria-Hungary, whose place among the
nations we wish to see safeguarded
and assured, should be accorded the freest opportunity to
autonomous development.

XI. Rumania, Serbia, and Montenegro should be evacuated;
occupied territories restored; Serbia
accorded free and secure access to the sea; and the relations of
the several Balkan states to one
another determined by friendly counsel along historically

5. established lines of allegiance and
nationality; and international guarantees of the political and
economic independence and
territorial integrity of the several Balkan states should be
entered into.

XII. The Turkish portion of the present Ottoman Empire should
be assured a secure sovereignty,
but the other nationalities which are now under Turkish rule
should be assured an undoubted
security of life and an absolutely unmolested opportunity of
autonomous development, and the



Dardanelles should be permanently opened as a free passage to
the ships and commerce of all
nations under international guarantees.

XIII. An independent Polish state should be erected which
should include the territories
inhabited by indisputably Polish populations, which should be
assured a free and secure access to
the sea, and whose political and economic independence and
territorial integrity should be
guaranteed by international covenant.

XIV. A general association of nations must be formed under
specific covenants for the purpose
of affording mutual guarantees of political independence and
territorial integrity to great and
small states alike.

In regard to these essential rectifications of wrong and
assertions of right we feel ourselves to be
intimate partners of all the governments and peoples associated

6. together against the Imperialists.
We cannot be separated in interest or divided in purpose. We
stand together until the end.

For such arrangements and covenants we are willing to fight and
to continue to fight until they
are achieved; but only because we wish the right to prevail and
desire a just and stable peace
such as can be secured only by removing the chief provocations
to war, which this programme
does remove. We have no jealousy of German greatness, and
there is nothing in this programme
that impairs it. We grudge her no achievement or distinction of
learning or of pacific enterprise
such as have made her record very bright and very enviable. We
do not wish to injure her or to
block in any way her legitimate influence or power. We do not
wish to fight her either with arms
or with hostile arrangements of trade if she is willing to
associate herself with us and the other
peace- loving nations of the world in covenants of justice and
law and fair dealing. We wish her
only to accept a place of equality among the peoples of the
world, -- the new world in which we
now live, -- instead of a place of mastery.




Table 5.2Walace Garden Center Data Figure 5.2SalesTest
Center Absolute Value of Error3 Month Moving
AverageAbsolute Value of ErrorJan1010.00------Feb1212.00----
--Mar1313.00------
Apr1616.000.000.00May1919.000.000.00Jun2323.000.000.00Jul
2626.000.000.00Aug3030.000.000.00Sep2828.000.000.00Oct18
18.000.000.00Nov1616.000.000.00Dec1414.000.000.00Jan------

7. 0.00---Sum of Abs Val of Error190.00Sum of Abs Val of
Error0.00MAD21.11MAD0.00Hence "on the average, each
forecast missed the actual value by"6.48 unitsp. 155

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 10
12 13 16 19 23 26 30 28 18 16 14



Table
5.4QuarterTonnageF(t+1)1180175.002168175.503159174.75417
5173.185190173.366205175.027180178.028182178.229---
178.60
Table 5.8Table 5.8Year 1Year 22-year averageSeasonal
IndexYear 3
ForecastJan80100900.957446808595.7Feb8575800.8510638298
85.1Mar8090850.904255319190.4Apr110901001.063829787210
6.4May1151311231.3085106383130.9Jun1201101151.22340425
53122.3Jul1001101051.1170212766111.7Aug110901001.063829
7872106.4Sep8595900.957446808595.7Oct7585800.851 063829
885.1Nov8575800.851063829885.1Dec8080800.851063829885.
1Total1128Forecast1200Average94Average100


Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 90
80 85 100 123 115 105 100 90 80 80 80





Forecasting



5

8. To accompany
Quantitative Analysis for Management, Twelfth Edition,
by Render, Stair, Hanna and Hale
Power Point slides created by Jeff Heyl
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After completing this chapter, students will be able to:

LEARNING OBJECTIVES
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5 – 2
Understand and know when to use various families of
forecasting models.
Compare moving averages, exponential smoothing, and other
time-series models.
Seasonally adjust data.
Understand Delphi and other qualitative decision-making
approaches.
Compute a variety of error measures.


5.1 Introduction
5.2 Types of Forecasting Models
5.3 Components of a Time Series
5.4 Measures of Forecast Accuracy
5.5 Forecasting Models – Random Variations Only
5.6 Forecasting Models – Trend and Random Variations
5.7 Adjusting for Seasonal Variations
5.8 Forecasting Models – Trend, Seasonal, and Random
Variations
5.9 Monitoring and Controlling Forecasts


CHAPTER OUTLINE

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Introduction
Main purpose of forecasting
Reduce uncertainty and make better estimates of what will
happen in the future
Subjective methods
Seat-of-the pants methods, intuition, experience
More formal quantitative and qualitative techniques
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Regression Analysis
Multiple
Regression




Moving
Average
Exponential Smoothing
Trend
Projections

Decomposition

10. Delphi
Methods
Jury of Executive
Opinion
Sales Force
Composite
Consumer
Market Survey


Time-Series Methods
Qualitative
Models
Causal
Methods
Forecasting Models
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Forecasting Techniques











FIGURE 5.1

11. Qualitative Models
Incorporate judgmental or subjective factors
Useful when subjective factors are important or accurate
quantitative data is difficult to obtain
Common qualitative techniques
Delphi method
Jury of executive opinion
Sales force composite
Consumer market surveys
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Qualitative Models
Delphi Method
Iterative group process
Respondents provide input to decision makers
Repeated until consensus is reached
Jury of Executive Opinion
Collects opinions of a small group of high-level managers
May use statistical models for analysis

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Qualitative Models
Sales Force Composite
Allows individual salespersons estimates
Reviewed for reasonableness
Data is compiled at a district or national level
Consumer Market Survey
Information on purchasing plans solicited from customers or
potential customers

12. Used in forecasting, product design, new product planning
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Time-Series Models
Predict the future based on the past
Uses only historical data on one variable
Extrapolations of past values of a series
Ignores factors such as
Economy
Competition
Selling price
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Components of a Time Series
Sequence of values recorded at successive intervals of time
Four possible components
Trend (T)
Seasonal (S)
Cyclical (C)
Random (R)
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Components of a Time Series
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14. Series 4: Trend, Seasonal and Random Variations
Series 3: Trend and Random Variations
















Series 2: Seasonal Variations Only
Series 1: Random Variations Only

Sales
| | | | | | | | | | | |
| | | |
1 2 3 4 5 6 7 8 9 10 11 12
13 14 15 16
Time Period (Quarters)
FIGURE 5.2 – Scatter Diagram for Four Time Series of

15. Quarterly Data


Components of a Time Series
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Sales
| | | | | | | | | |
0 2 4 6 8 10 12 14 16 18
Time Period (Years)
FIGURE 5.3 – Scatter Diagram of Times Series with Cyclical
and Random Components



Time-Series Models
Two basic forms
Multiplicative
Demand = T x S x C x R

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Additive
Demand = T + S + C + R
Combinations are possible


Measures of Forecast Accuracy
Compare forecasted values with actual values
See how well one model works
To compare models
Forecast error = Actual value – Forecast value
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Measure of accuracy
Mean absolute deviation (MAD):


Measures of Forecast Accuracy
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5 – 15YEARACTUAL
SALES OF WIRELESS SPEAKERSFORECAST
SALESABSOLUTE VALUE OF
ERRORS (DEVIATION), (ACTUAL – FORECAST)1110—
21001103120100414012051701406150170716015081901609200
1901019020011—190
TABLE 5.1 – Computing the Mean Absolute Deviation (MAD)


Measures of Forecast Accuracy
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5 – 16YEARACTUAL
SALES OF WIRELESS SPEAKERSFORECAST
SALESABSOLUTE VALUE OF

17. ERRORS (DEVIATION), (ACTUAL – FORECAST)1110—
21001103120100414012051701406150170716015081901609200
1901019020011—190
TABLE 5.1 – Computing the Mean Absolute Deviation (MAD)
Forecast based on naïve model
No attempt to adjust for time series components

YEARACTUAL
SALES OF WIRELESS SPEAKERSFORECAST
SALESABSOLUTE VALUE OF
ERRORS (DEVIATION), (ACTUAL – FORECAST)1110—
21001103120100414012051701406150170716015081901609200
1901019020011—190—|100 – 110| = 10|120 – 110| = 20|140 –
120| = 20|170 – 140| = 30|150 – 170| = 20|160 – 150| = 10|190 –
160| = 30|200 – 190| = 10|190 – 200| = 10—Sum of |errors| =
160MAD = 160/9 = 17.8
Measures of Forecast Accuracy
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TABLE 5.1 – Computing the Mean Absolute Deviation (MAD)





Measures of Forecast Accuracy
Other common measures
Mean squared error (MSE)



Mean absolute percent error (MAPE)

18. Bias is the average error
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Forecasting Random Variations
No other components are present
Averaging techniques smooth out forecasts
Moving averages
Weighted moving averages
Exponential smoothing
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Moving Averages
Used when demand is relatively steady over time
The next forecast is the average of the most recent n data values
from the time series
Smooths out short-term irregularities in the data series

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Moving average forecast =
Sum of demands in previous n periods
n


Moving Averages
Mathematically

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19. 5 – 21


where
Ft+1 = forecast for time period t + 1
Yt = actual value in time period t
n = number of periods to average


Wallace Garden Supply
Wallace Garden Supply wants to forecast demand for its Storage
Shed
Collected data for the past year
Use a three-month moving average (n = 3)



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Wallace Garden Supply


TABLE 5.2MONTHACTUAL SHED SALES3 -MONTH
MOVING
AVERAGEJanuary10February12March13April16May19June23J
uly26August30September28October18November16December14J
anuary—
(12 + 13 + 16)/3 = 13.67
(13 + 16 + 19)/3 = 16.00
(16 + 19 + 23)/3 = 19.33
(19 + 23 + 26)/3 = 22.67
(23 + 26 + 30)/3 = 26.33
(26 + 30 + 28)/3 = 28.00
(30 + 28 + 18)/3 = 25.33

20. (28 + 18 + 16)/3 = 20.67
(18 + 16 + 14)/3 = 16.00
(10 + 12 + 13)/3 = 11.67




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Weighted Moving Averages
Weighted moving averages use weights to put more emphasis on
previous periods
Often used when a trend or other pattern is emerging



Mathematically

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where
wi = weight for the ith observation


Wallace Garden Supply
Use a 3-month weighted moving average model to forecast
demand
Weighting scheme
5 – 25

21. WEIGHTS APPLIEDPERIOD3 Last month2 Two months
ago1 Three months ago6

3 x Sales last month + 2 x Sales two months ago + 1 X Sales
three months ago







Sum of the weights

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Wallace Garden Supply

TABLE 5.3
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5 – 26MONTHACTUAL SHED SALES3 -MONTH WEIGHTED
MOVING
AVERAGEJanuary10February12March13April16May19June23J
uly26August30September28October18November16December14J
anuary—
[(3 X 13) + (2 X 12) + (10)]/6 = 12.17




[(3 X 16) + (2 X 13) + (12)]/6 = 14.33
[(3 X 19) + (2 X 16) + (13)]/6 = 17.00
[(3 X 23) + (2 X 19) + (16)]/6 = 20.50
[(3 X 26) + (2 X 23) + (19)]/6 = 23.83
[(3 X 30) + (2 X 26) + (23)]/6 = 27.50

22. [(3 X 28) + (2 X 30) + (26)]/6 = 28.33
[(3 X 18) + (2 X 28) + (30)]/6 = 23.33
[(3 X 16) + (2 X 18) + (28)]/6 = 18.67
[(3 X 14) + (2 X 16) + (18)]/6 = 15.33


Exponential Smoothing
Exponential smoothing
A type of moving average
Easy to use
Requires little record keeping of data

New forecast = Last period’s forecast

– Last period’s forecast)

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Exponential Smoothing
Mathematically


where
Ft+1 = new forecast (for time period t + 1)
Yt = pervious forecast (for time period t)

Yt = pervious period’s actual demand
The idea is simple – the new estimate is the old estimate plus
some fraction of the error in the last period
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Exponential Smoothing Example

23. In January, February’s demand for a certain car model was
predicted to be 142
Actual February demand was 153 autos
March?
New forecast (for March demand) = 142 + 0.2(153 – 142)
= 144.2 or 144 autos
New forecast (for April demand) = 144.2 + 0.2(136 – 144.2)
= 142.6 or 143 autos
If actual March demand = 136
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Selecting the Smoothing Constant
forecast
The objective is always to generate an accurate forecast
The general approach is to develop trial forecasts with different

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Port of Baltimore ExampleQUARTERACTUAL TONNAGE
UNLOADEDFORECAST

USING
1752168175.5 = 175.00 + 0.10(180 – 175)
177.53159174.75 = 175.50 + 0.10(168 – 175.50)
172.754175173.18 = 174.75 + 0.10(159 – 174.75)
165.885190173.36 = 173.18 + 0.10(175 – 173.18)
170.446205175.02 = 173.36 + 0.10(190 – 173.36)
180.227180178.02 = 175.02 + 0.10(205 – 175.02)
192.618182178.22 = 178.02 + 0.10(180 – 178.02)
186.309?178.60 = 178.22 + 0.10(182 – 178.22) 184.15

24. TABLE 5.4 –

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Port of Baltimore Example
TABLE 5.5 – Absolute Deviations and MADs
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5 – 32QUARTERACTUAL TONNAGE

0.50ABSOLUTE
175 5 175 5….2168
175.5 7.5.. 177.5 9.5..3159 174.75 15.75
172.75 13.754175 173.18 1.82 165.88
9.125190 173.36 16.64 170.44 19.566205
175.02 29.98 180.22 24.787180 178.02
1.98 192.61 12.618182 178.22 3.78 186.30
4.3..Sum of absolute deviations82.45 98.63MAD
=Σ|deviations|=10.31MAD =12.33n

Best choice



Using Software
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PROGRAM 5.1A – Selecting the Forecasting Model



Using Software
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25. PROGRAM 5.1B – Initializing Excel QM



Using Software
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PROGRAM 5.1C – Excel QM Output



Using Software
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PROGRAM 5.2A – Selecting Time-Series Analysis in QM for
Windows



Using Software
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PROGRAM 5.2B – Entering Data



Using Software
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PROGRAM 5.2C – Selecting the Model and Entering Data



Using Software
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26. PROGRAM 5.2D – Output for Port of Baltimore Example



Forecasting – Trend and Random
Exponential smoothing does not respond to trends
A more complex model can be used
The basic approach
Develop an exponential smoothing forecast
Adjust it for the trend

Forecast including trend (FITt+1)
Smoothed forecast (Ft+1) + Smoothed Trend (Tt+1)
=
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Exponential Smoothing
with Trend
The equation for the trend correction uses a new smoothing

Ft and Tt must be given or estimated
Three steps in developing FITt
Step 1: Compute smoothed forecast Ft+1
Smoothed forecast
=
Previous forecast including trend
+ a(Last error)


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Exponential Smoothing

27. with Trend
Step 2: Update the trend (Tt +1) using


Smoothed forecast
=
Previous forecast including trend
b(Error or excess in trend)
+
Step 3: Calculate the trend-adjusted exponential smoothing
forecast (FITt +1) using
Forecast including trend (FITt+1)
=
+
Smoothed forecast (Ft+1)
Smoothed trend (Tt+1)


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Selecting a Smoothing Constant
changes in trend
to smooth out the trend
Values are often selected using a trial-and-error approach based


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Midwestern Manufacturing
Demand for electrical generators from 2007 – 2013

28. Midwest assumes F1 is perfect, T1 = 0, a = 0.3, b = 0.4
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5 – 44YEARELECTRICAL GENERATORS
SOLD200774200879200980201090201110520121422013122
TABLE 5.6 – Demand




Midwestern Manufacturing
For 2008 (time period 2)
Step 1: Compute Ft+1
F2 = FIT1 + a(Y1 – FIT1)
= 74 + 0.3(74 – 74) = 74
Step 2: Update the trend
T2 = T1 + b(F2 – FIT1)
= 0 + .4(74 – 74) = 0

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Midwestern Manufacturing
Step 3: Calculate the trend-adjusted exponential smoothing
forecast (Ft+1) using
FIT2 = F2 + T2
= 74 + 0 = 74
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Midwestern Manufacturing
For 2009 (time period 3)
Step 1: F3 = FIT2 + a(Y2 – FIT2)
= 74 + 0.3(79 – 74) = 75.5
Step 2: T3 = T2 + .4(F3 – FIT2)

29. = 0 + .4(75.5 – 74) = 0.6
Step 3: FIT3 = F3 + T3
= 75.5 + 0.6 = 76.1
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Midwestern Manufacturing
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5 – 48TIME (t)DEMAND (Yt)Ft+1 = FITt + 0.3(Yt – FITt)Tt+1
= Tt + 0.4(Ft+1 – FITt)FITt+1 = Ft+1 + Tt+11 74740742
7974
= 74 + 0.3(74 – 74)0
= 0 + 0.4(74 – 74)74
= 74 + 03 8075.5
= 74 + 0.3(79 – 74)0.6
= 0 + 0.4(75.5 – 74)76.1
= 75.5 + 0.64 9077.270
= 76.1 + 0.3(80 – 76.1)1.068
= 0.6 + 0.4(77.27 – 76.1)78.338
= 77.270 + 1.0685 10581.837
= 78.338 + 0.3(90 – 78.338)2.468
= 1.068 + 0.4(81.837 – 78.338)84.305
= 81.837 + 2.4686 14290.514
= 84.305 + 0.3(105 – 84.305)4.952
= 2.468 + 0.4(90.514 – 84.305)95.466
= 90.514 + 4.9527 122109.426
= 95.446 + 0.3(142 – 95.466)10.536
= 4.952 + 0.4(109.426 – 95.466)119.962
= 109.426 + 10.5368120.573
= 119.962 + 0.3(122 – 119.962)10.780
= 10.536 + 0.4(120.573 – 119.962)131.353
= 120.573 + 10.780
TABLE 5.7 – Exponential Smoothing with Trend Forecasts

30. Midwestern Manufacturing
PROGRAM 5.3 – Output from Excel QM Trend-Adjusted
Exponential Smoothing
Copyright ©2015 Pearson Education, Inc.
5 – 49



Trend Projections
Fits a trend line to a series of historical data points
Projected into the future for medium- to long-range forecasts
Trend equations can be developed based on exponential or
quadratic models
Linear model developed using regression analysis is simplest
Copyright ©2015 Pearson Education, Inc.
5 – 50


Trend Projections
Mathematical formula
Copyright ©2015 Pearson Education, Inc.
5 – 51


where
= predicted value
b0 = intercept
b1 = slope of the line
X = time period (i.e., X = 1, 2, 3, …, n)




Midwestern Manufacturing
Based on least squares regression, the forecast equation is

31. (sales in 2014) = 56.71 + 10.54(8)
= 141.03, or 141 generators
(sales in 2015) = 56.71 + 10.54(9)
= 151.57, or 152 generators
Copyright ©2015 Pearson Education, Inc.
5 – 52
Year 2014 is coded as X = 8
For X = 9


Midwestern Manufacturing
Copyright ©2015 Pearson Education, Inc.
5 – 53

PROGRAM 5.4 – Output from Excel QM for Trend Line


Midwestern Manufacturing
Copyright ©2015 Pearson Education, Inc.
5 – 54
PROGRAM 5.5 – Output from QM for Trend Line



Midwestern Manufacturing
Copyright ©2015 Pearson Education, Inc.
5 – 55
FIGURE 5.4 – Generator Demand Based on Trend Line

32. x
x
x
| | | | | | | | | | | |
0 1 2 3 4 5 6 7 8 9 10 11

180 –
160 –
140 –
120 –
100 –
80 –
60 –
40 –
20 –
0 –
Generator Demand
Time Period
Projected demand for next 3 years is shown on the trend line
Trend Line




Seasonal Variations
Recurring variations over time may indicate the need for
seasonal adjustments in the trend line
A seasonal index indicates how a particular season compares
with an average season
An index of 1 indicates an average season
An index > 1 indicates the season is higher than average
An index < 1 indicates a season lower than average
Copyright ©2015 Pearson Education, Inc.
5 – 56

33. Seasonal Indices
Deseasonalized data is created by dividing each observation by
the appropriate seasonal index
Once deseasonalized forecasts have been developed, values are
multiplied by the seasonal indices
Computed in two ways
Overall average
Centered-moving-average approach
Copyright ©2015 Pearson Education, Inc.
5 – 57


Seasonal Indices with No Trend
Divide average value for each season by the average of all data

Telephone answering machines at Eichler Supplies
Sales data for the past two years for one model
Create a forecast that includes seasonality
Copyright ©2015 Pearson Education, Inc.
5 – 58


Seasonal Indices with No Trend
Copyright ©2015 Pearson Education, Inc.
5 – 59MONTHSALES DEMANDAVERAGE 2 - YEAR
DEMANDMONTHLY DEMANDAVERAGE SEASONAL
INDEXYEAR 1YEAR 2January 80 100
90940.957February 85 75 80940.851March 80 90
85940.904April 110 90 100941.064May 115
131 123941.309June 120 110 115941.223July
100 110 105941.117August 110 90
100941.064September 85 95 90940.957October 75
85 80940.851November 85 75
80940.851December 80 80 80940.851Total average

34. demand = 1,128
Seasonal index =
Average 2-year demand
Average monthly demand


Average monthly demand = = 94
1,128
12 months


TABLE 5.8 – Answering Machine Sales and Seasonal Indices


Seasonal Indices with No Trend
Calculations for the seasonal indices
Copyright ©2015 Pearson Education, Inc.
5 – 60
Jan.
July




Feb.
Aug.




Mar.
Sept.

35. Apr.
Oct.




May
Nov.




June
Dec.






Seasonal Indices with Trend
Changes could be due to trend, seasonal, or random
Centered moving average (CMA) approach prevents trend being
interpreted as seasonal
Turner Industries sales contain both trend and seasonal
components
Copyright ©2015 Pearson Education, Inc.
5 – 61


Seasonal Indices with Trend
Steps in CMA
Compute the CMA for each observation (where possible)
Compute the seasonal ratio = Observation/CMA for that
observation
Average seasonal ratios to get seasonal indices

36. If seasonal indices do not add to the number of seasons,
multiply each index by (Number of seasons)/(Sum of indices)
Copyright ©2015 Pearson Education, Inc.
5 – 62


Turner IndustriesQUARTERYEAR 1YEAR 2YEAR
3AVERAGE1 108 116 123115.672 125 134 142133.673
150 159 168159.004 141 152 165152.67Average
131.00 140.25 149.50140.25
TABLE 5.9 – Quarterly Sales Data

Definite trend


Seasonal pattern

Copyright ©2015 Pearson Education, Inc.
5 – 63


Turner Industries
To calculate the CMA for quarter 3 of year 1, compare the
actual sales with an average quarter centered on that time period
Use 1.5 quarters before quarter 3 and 1.5 quarters after quarter
3
Take quarters 2, 3, and 4 and one half of quarters 1, year 1 and
quarter 1, year 2
Copyright ©2015 Pearson Education, Inc.
5 – 64




Turner Industries
Compare the actual sales in quarter 3 to the CMA to find the

37. seasonal ratio
Copyright ©2015 Pearson Education, Inc.
5 – 65




Turner Industries
TABLE 5.10 – Centered Moving Averages and Seasonal Ratios
Copyright ©2015 Pearson Education, Inc.
5 – 66YEARQUARTERSALESCMASEASONAL
RATIO1110821253150132.0001.1364141134.1251.0512111613
6.3750.8512134138.8750.9653159141.1251.1274152143.0001.0
6331123145.1250.8482142147.8750.96031684165


Turner Industries
The two seasonal ratios for each quarter are averaged to get the
seasonal index
Copyright ©2015 Pearson Education, Inc.
5 – 67
Index for quarter 1 = I1 = (0.851 + 0.848)/2 = 0.85
Index for quarter 2 = I2 = (0.965 + 0.960)/2 = 0.96
Index for quarter 3 = I3 = (1.136 + 1.127)/2 = 1.13
Index for quarter 4 = I4 = (1.051 + 1.063)/2 = 1.06

38. Turner Industries
Scatterplot of Turner Industries Sales Data and Centered
Moving Average
Copyright ©2015 Pearson Education, Inc.
5 – 68











CMA

Original Sales Figures

200 –
150 –
100 –
50 –
0 –

Sales
| | | | | | | | | | | |
1 2 3 4 5 6 7 8 9 10 11 12
Time Period

39. 68

Trend, Seasonal, and Random Variations
Decomposition – isolating linear trend and seasonal factors to
develop more accurate forecasts
Five steps to decomposition
Compute seasonal indices using CMAs.
Deseasonalize the data by dividing each number by its seasonal
index
Find the equation of a trend line using the deseasonalized data
Forecast for future periods using the trend line
Multiply the trend line forecast by the appropriate seasonal
index
Copyright ©2015 Pearson Education, Inc.
5 – 69



69

Deseasonalized Data
Copyright ©2015 Pearson Education, Inc.
5 – 70SALES ($1,000,000s)SEASONAL
INDEXDESEASONALIZED SALES
($1,000,000s)1080.85127.0591250.96130.2081501.13132.74314
11.06133.0191160.85136.4711340.96139.5831591.13140.70815
21.06143.3961230.85144.7061420.96147.9171681.13148.67316
51.06155.660
TABLE 5.11



70

Deseasonalized Data

40. Find a trend line using the deseasonalized data where X = time
b1 = 2.34 b0 = 124.78

Copyright ©2015 Pearson Education, Inc.
5 – 71


Develop a forecast for quarter 1, year 4
(X = 13) using this trend and multiply the forecast by the
appropriate seasonal index





71

Find a trend line using the deseasonalized data where X = time
b1 = 2.34 b0 = 124.78

Deseasonalized Data
Copyright ©2015 Pearson Education, Inc.
5 – 72


Develop a forecast for quarter 1, year 4
(X = 13) using this trend and multiply the forecast by the
appropriate seasonal index



Including the seasonal index

41. 72

200 –
150 –
100 –
50 –
0 –

Sales
| | | | | | | | | | | |
| |
0 1 2 3 4 5 6 7 8 9 10 11
12 13
Time Period (Quarters)
Deseasonalized Data
Copyright ©2015 Pearson Education, Inc.
5 – 73
FIGURE 5.5












x
x
x
x
x

42. x
x
x
x
x
x
x
x

Deseasonalized Sales Data

Sales Data



73

Using Software
Copyright ©2015 Pearson Education, Inc.
5 – 74

PROGRAM 5.6A – QM for Windows Input


Using Software
Copyright ©2015 Pearson Education, Inc.
5 – 75
PROGRAM 5.6B – QM for Windows Output



Using Regression with Trend
and Seasonal
Multiple regression can be used to forecast both trend and
seasonal components
One independent variable is time

43. Dummy independent variables are used to represent the seasons
An additive decomposition model
Copyright ©2015 Pearson Education, Inc.
5 – 76


where
X1 = time period
X2 = 1 if quarter 2, 0 otherwise
X3 = 1 if quarter 3, 0 otherwise
X4 = 1 if quarter 4, 0 otherwise


Using Regression with Trend
and Seasonal
Copyright ©2015 Pearson Education, Inc.
5 – 77

PROGRAM 5.7A – Excel QM Multiple Regression Initialization


Using Regression with Trend
and Seasonal
Copyright ©2015 Pearson Education, Inc.
5 – 78

PROGRAM 5.7B – Excel QM Multiple Regression Output


Using Regression with Trend
and Seasonal
Regression equation
Copyright ©2015 Pearson Education, Inc.
5 – 79

44. Forecasts for first two quarters next year




Regression equation
Using Regression with Trend
and Seasonal
Copyright ©2015 Pearson Education, Inc.
5 – 80


Forecasts for first two quarters next year


Different from the results using the multiplicative
decomposition method
Use MAD or MSE to determine the best model


Monitoring and Controlling Forecasts
Tracking signal measures how well a forecast predicts actual
values
Running sum of forecast errors (RSFE) divided by the MAD
Copyright ©2015 Pearson Education, Inc.
5 – 81






Monitoring and Controlling Forecasts
Positive tracking signals indicate demand is greater than
forecast
Negative tracking signals indicate demand is less than forecast

45. A good forecast will have about as much positive error as
negative error
Problems are indicated when the signal trips either the upper or
lower predetermined limits
Choose reasonable values for the limits
Copyright ©2015 Pearson Education, Inc.
5 – 82


Monitoring and Controlling Forecasts
Copyright ©2015 Pearson Education, Inc.
5 – 83
Acceptable Range




Signal Tripped



Upper Control Limit
Lower Control Limit

0 MADs
+
–
Time

Tracking Signal

FIGURE 5.7 – Plot of Tracking Signals


Kimball’s Bakery Example
Quarterly sales of croissants (in thousands)

46. Copyright ©2015 Pearson Education, Inc.
5 – 84TIME PERIODFORECAST DEMANDACTUAL
DEMANDERRORRSFE|FO RECAST |
| ERROR |CUMULATIVE ERRORMADTRACKING
SIGNAL1100 90 –10–10 101010.0 –12100 95 –5–15
5157.5 –23100 115 +150 153010.0 04110 100 –
10–10 104010.0 –15110 125 +15+5 155511.0
+0.56110 140 +30+35 358514.2 +2.5


For Period 6:


Adaptive Smoothing
Computer monitoring of tracking signals and self-adjustment if
a limit is tripped
when the computer detects an excessive amount of variation
Copyright ©2015 Pearson Education, Inc.
5 – 85


Copyright

All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted, in any
form or by any means, electronic, mechanical, photocopying,
recording, or otherwise, without the prior written permission of
the publisher. Printed in the United States of America.



1

47. 1.6 The Role of Computers and Spreadsheet Models
in the Quantitative Analysis Approach

1.7 Possible Problems in the Quantitative Analysis
Approach

1.8 Implementation—Not Just the Final Step

1.1 Introduction
1.2 What Is Quantitative Analysis?
1.3 Business Analytics
1.4 The Quantitative Analysis Approach
1.5 How to Develop a Quantitative Analysis Model

CHAPTER OUTLINE

5. Use computers and spreadsheet models
to perform quantitative analysis.

6. Discuss possible problems in using quantitative
analysis.

7. Perform a break-even analysis.

1. Describe the quantitative analysis approach.
2. Understand the application of quantitative analysis

in a real situation.
3. Describe the three categories of business analytics.
4. Describe the use of modeling in quantitative

analysis.

After completing this chapter, students will be able to:

Introduction to

48. Quantitative Analysis

1CHAPTER

LEARNING OBJECTIVES

M01_REND7331_12_SE_C01_pp2.indd 1 01/ 10/13 9:50 AM



1


1.6 The Role of Computers and Spreadsheet Models
in the Quantitative Analysis Approach

1.7 Possible Problems in the Quantitative Analysis
Approach

1.8 Implementation—Not Just the Final Step

1.1 Introduction
1.2 What Is Quantitative Analysis?
1.3 Business Analytics
1.4 The Quantitative Analysis Approach
1.5 How to Develop a Quantitative Analysis Model

CHAPTER OUTLINE

5. Use computers and spreadsheet models
to perform quantitative analysis.

6. Discuss possible problems in using quantitative
analysis.

7. Perform a break-even analysis.

49. 1. Describe the quantitative analysis approach.
2. Understand the application of quantitative analysis

in a real situation.
3. Describe the three categories of business analytics.
4. Describe the use of modeling in quantitative

analysis.

After completing this chapter, students will be able to:

Introduction to
Quantitative Analysis

1CHAPTER

LEARNING OBJECTIVES

M01_REND7331_12_SE_C01_pp2.indd 1 01/10/13 9:50 AM



MAD =
forecast error∑

n

MAD=
forecast error
å
n


MAD =
forecast error∑

50. n
=

160
9

=17.8

MAD=
forecast error
å
n
=
160
9
=17.8


MAPE =

error
actual∑
n

100%

MAPE=
error
actual
å
n
100%


MSE =

51. (error)2∑
n

MSE=
(error)
2
å
n


Ft+1 =
Yt +Yt−1 +...+Yt−n+1

n

F
t+1
=
Y
t
+Y
t-1
+...+Y
t-n+1
n


Ft+1 =
(Weight in period i)(Actual value in period)∑

(Weights)∑

F
t+1
=
(Weight in period i)(Actual value in period)

52. å
(Weights)
å


Ft+1 =
w1Yt +w2Yt−1 +...+wnYt−n+1

w1 +w2 +...+wn

F
t+1
=
w
1
Y
t
+w
2
Y
t-1
+...+w
n
Y
t-n+1
w
1
+w
2
+...+w
n


Ft+1 = Ft +α(Yt −Ft )

F

53. t+1
=F
t
+a(Y
t
-F
t
)


Enter the number of periods to be averaged.

Click OK.

Enter a title. Enter the number of past periods of data.



Enter the demand data and the weights. The
calculations will automatically be performed.

The measures of accuracy are shown here.

The forecast for the next period is here.



In the Forecasting module, click
New and Time-Series Analysis.



Enter a title.

Enter the number of
past periods of data.

54. Click OK.



Enter the value for the
smoothing constant.

Enter the data. Then click
Solve at the top of the page.

Click here to see the models. Other input
areas appear based on the model. Select
Exponential Smoothing and a window opens
for you to enter the smoothing constant.



Additional output is
available under Window.

The measures of
accuracy are shown here.

The forecast for next
period is here.



Ft+1 = FITt +α(Yt −FITt )

F
t+1
=FIT
t
+a(Y

55. t
-FIT
t
)


Tt+1 =Tt +β(Ft+1 −FITt )

T
t+1
=T
t
+b(F
t+1
-FIT
t
)


FITt+1 = Ft+1 +Tt+1

FIT
t+1
=F
t+1
+T
t+1


FIT1 = F1 +T1 = 74+0 = 74

FIT
1
=F
1
+T

56. 1
=74+0=74


Ŷ = b0 + b1X

ˆ
Y=b
0
+b
1
X


Ŷ

ˆ
Y


Ŷ = 56.71+10.54X

ˆ
Y=56.71+10.54X


To forecast other time periods,
enter the time period here.

The forecast for next period is here.



Forecasts for future time
periods are shown here.

57. The trend line is
shown over two lines.



Ŷ = 56.71+10.54X

ˆ
Y=56.71+10.54X


1,200
12

× 0.957 = 96

1,200
12
´ 0.957 = 96


1,200
12

× 0.851 = 85

1,200
12
´ 0.851 = 85


1,200
12

× 1.223 = 122

58. 1,200
12
´ 1.223 = 122


1,200
12

× 0.851 = 85

1,200
12
´ 0.851 = 85


1,200
12

× 1.117 = 112

1,200
12
´ 1.117 = 112


1,200
12

× 0.851 = 85

1,200
12
´ 0.851 = 85


1,200

59. 12

× 1.064 = 106

1,200
12
´ 1.064 = 106


1,200
12

× 0.904 = 90

1,200
12
´ 0.904 = 90


1,200
12

× 0.957 = 96

1,200
12
´ 0.957 = 96


1,200
12

× 1.064 = 106

1,200
12

60. ´ 1.064 = 106


1,200
12

× 0.851 = 85

1,200
12
´ 0.851 = 85


1,200
12

× 1.309 = 131

1,200
12
´ 1.309 = 131


CMA(q3, y1) = 0.5(108) + 125 + 150 + 141 + 0.5(116)
4

= 132.0

CMA(q3, y1) =
0.5(108) + 125 + 150 + 141 + 0.5(116)
4
= 132.0


Seasonal ratio = Sales in quarter 3
CMA

61. =
150

132.0
=1.136

Seasonal ratio=
Sales in quarter 3
CMA
=
150
132.0
=1.136


Ŷ =124.78+2.34X

ˆ
Y=124.78+2.34X


Ŷ =124.78+2.34(13)
=155.2 (before seasonality adjustment)

ˆ
Y=124.78+2.34(13)
=155.2 (before seasonality adjustment)


Ŷ =124.78+2.34(13)
=155.2 (before seasonality)

ˆ
Y=124.78+2.34(13)
=155.2 (before seasonality)

62. Ŷ × I1 =155.2×0.85 =131.92

ˆ
Y´I
1
=155.2´0.85=131.92


Select Rescale:
set average to 1

Specify Centered Moving
Average approach

Specify the number of seasons
(4 for quarterly data)

Select Multiplicative Decomposition
from the drop-down menu.

Input the data



Ŷ = a+ b1X1 + b2X 2 + b3X3 + b4X 4

ˆ
Y=a+b
1
X
1
+b
2
X

63. 2
+b
3
X
3
+b
4
X
4


Enter the number of
past period of data.

Enter the number of
independent variables.



Enter the values of
Y and X1–X4 as shown.

The regression coef!cients
are shown here.

Enter the values of the variables
to obtain any forecast.



Ŷ =104.1 + 2.3X1 + 15.7X2 + 38.7X3 + 30.1X 4

ˆ
Y=104.1 + 2.3X
1
+ 15.7X

64. 2
+ 38.7X
3
+ 30.1X
4


Ŷ =104.1 + 2.3(13) + 15.7(0) + 38.7(0) + 30.1(0) =134

Ŷ =104.1 + 2.3(14) + 15.7(1) + 38.7(0) + 30.1(0) =152

ˆ
Y=104.1 + 2.3(13) + 15.7(0) + 38.7(0) + 30.1(0)=134
ˆ
Y=104.1 + 2.3(14) + 15.7(1) + 38.7(0) + 30.1(0)=152


Tracking signal = RSFE
MAD

=
(forecast error)∑

MAD

Tracking signal=
RSFE
MAD
=
(forecast error)
å
MAD


MAD =
forecast error∑

65. n

MAD=
forecast error
å
n


MAD =
forecast error∑

n
=

85
6
=14.2

Tracking signal = RSFE
MAD

=
35

14.2
= 2.5 MADs

MAD=
forecast error
å
n
=
85
6
=14.2

66. Tracking signal=
RSFE
MAD
=
35
14.2
=2.5 MADs




President Roosevelt's "Four Freedoms" Speech (1941)


To the Congress of the United States:

I address you, the Members of the Seventy-Seventh Congress, at
a moment unprecedented in the
history of the Union. I use the word "unprecedented," because at
no previous time has American
security been as seriously threatened from without as it is
today. . . .

It is true that prior to 1914 the United States often had been
disturbed by events in other
Continents. We had even engaged in two wars with European
nations and in a number of
undeclared wars in the West Indies, in the Mediterranean and in
the Pacific for the maintenance
of American rights and for the principles of peaceful commerce.
In no case, however, had a
serious threat been raised against our national safety or our
independence.

What I seek to convey is the historic truth that the United States
as a nation has at all times

67. maintained opposition to any attempt to lock us in behind an
ancient Chinese wall while the
procession of civilization went past. Today, thinking of our
children and their children, we
oppose enforced isolation for ourselves or for any part of the
Americas.

Even when the World War broke out in 1914, it seemed to
contain only small threat of danger to
our own American future. But, as time went on, the American
people began to visualize what the
downfall of democratic nations might mean to our own
democracy.

We need not over-emphasize imperfections in the Peace of
Versailles. We need not harp on
failure of the democracies to deal with problems of world
deconstruction. We should remember
that the Peace of 1919 was far less unjust than the kind of
"pacification" which began even
before Munich, and which is being carried on under the new
order of tyranny that seeks to spread
over every continent today. The American people have
unalterably set their faces against that
tyranny.

Every realist knows that the democratic way of life is at this
moment being directly assailed in
every part of the world—assailed either by arms, or by secret
spreading of poisonous propaganda
by those who seek to destroy unity and promote discord in
nations still at peace. During sixteen
months this assault has blotted out the whole pattern of
democratic life in an appalling number of
independent nations, great and small. The assailants are still on
the march, threatening other

68. nations, great and small.

Therefore, as your President, performing my constitutional duty
to "give to the Congress
information of the state of the Union," I find it necessary to
report that the future and the safety
of our country and of our democracy are overwhelmingly
involved in events far beyond our
borders.

Armed defense of democratic existence is now being gallantly
waged in four continents. If that
defense fails, all the population and all the resources of Europe,
Asia, Africa and Australasia will
be dominated by the conquerors. The total of those populations
and their resources greatly



exceeds the sum total of the population and resources of the
whole of the Western Hemisphere—
many times over.

In times like these it is immature—and incidentally untrue—for
anybody to brag that an
unprepared America, single-handed, and with one hand tied
behind its back, can hold off the
whole world.

No realistic American can expect from a dictator's peace
international generosity, or return of
true independence, or world disarmament, or freedom of
expression, or freedom of religion—or
even good business. Such a peace would bring no security for us
or for our neighbors. "Those,
who would give up essential liberty to purchase a little

69. temporary safety, deserve neither liberty
nor safety." As a nation we may take pride in the fact that we
are soft-hearted; but we cannot
afford to be soft-hearted. We must always be wary of those who
with sounding brass and a
tinkling cymbal preach the "ism" of appeasement. We must
especially beware of that small group
of selfish men who would clip the wings of the American eagle
in order to feather their own
nests.

I have recently pointed out how quickly the tempo of modern
warfare could bring into our very
midst the physical attack which we must expect if the dictator
nations win this war.

There is much loose talk of our immunity from immediate and
direct invasion from across the
seas. Obviously, as long as the British Navy retains its power,
no such danger exists. Even if
there were no British Navy, it is not probable that any enemy
would be stupid enough to attack
us by landing troops in the United States from across thousands
of miles of ocean, until it had
acquired strategic bases from which to operate. But we learn
much from the lessons of the past
years in Europe—particularly the lesson of Norway, whose
essential seaports were captured by
treachery and surprise built up over a series of years. The first
phase of the invasion of this
Hemisphere would not be the landing of regular troops. The
necessary strategic points would be
occupied by secret agents and their dupes—and great numbers
of them are already here, and in
Latin America.

70. As long as the aggressor nations maintain the offensive, they—
not we—will choose the time and
the place and the method of their attack. That is why the future
of all American Republics is
today in serious danger. That is why this Annual Message to the
Congress is unique in our
history. That is why every member of the Executive branch of
the government and every
member of the Congress face great responsibility—and great
accountability.

The need of the moment is that our actions and our policy
should be devoted primarily—almost
exclusively—to meeting this foreign peril. For all our domestic
problems are now a part of the
great emergency. Just as our national policy in internal affairs
has been based upon a decent
respect for the rights and dignity of all our fellowmen within
our gates, so our national policy in
foreign affairs has been based on a decent respect for the rights
and dignity of all nations, large
and small. And the justice of morality must and will win in the
end.

Our national policy is this.

First, by an impressive expression of the public will and without
regard to partisanship, we are
committed to all-inclusive national defense.



Second, by an impressive expression of the public will and
without regard to partisanship, we are
committed to full support of all those resolute peoples,
everywhere, who are resisting aggression

71. and are thereby keeping war away from our Hemisphere. By this
support, we express our
determination that the democratic cause shall prevail; and we
strengthen the defense and security
of our own nation.

Third, by an impressive expression of the public will and
without regard to partisanship, we are
committed to the proposition that principles of morality and
considerations for our own security
will never permit us to acquiesce in a peace dictated by
aggressors and sponsored by appeasers.
We know that enduring peace cannot be bought at the cost of
other people's freedom.

In the recent national election there was no substantial
difference between the two great parties
in respect to that national policy. No issue was fought out on
this line before the American
electorate. Today, it is abundantly evident that American
citizens everywhere are demanding and
supporting speedy and complete action in recognition of
obvious danger. Therefore, the
immediate need is a swift and driving increase in our armament
production. . . .

Our most useful and immediate role is to act as an arsenal for
them as well as for ourselves. They
do not need man power. They do need billions of dollars worth
of the weapons of defense. . . .

Let us say to the democracies: "We Americans are vitally
concerned in your defense of freedom.
We are putting forth our energies, our resources and our
organizing powers to give you the
strength to regain and maintain a free world. We shall send you,

72. in ever-increasing numbers,
ships, planes, tanks, guns. This is our purpose and our pledge."
In fulfillment of this purpose we
will not be intimidated by the threats of dictators that they will
regard as a breach of international
law and as an act of war our aid to the democracies which dare
to resist their aggression. Such
aid is not an act of war, even if a dictator should unilaterally
proclaim it so to be. When the
dictators are ready to make war upon us, they will not wait for
an act of war on our part. They
did not wait for Norway or Belgium or the Netherlands to
commit an act of war. Their only
interest is in a new one-way international law, which lacks
mutuality in its observance, and,
therefore, becomes an instrument of oppression.

The happiness of future generations of Americans may well
depend upon how effective and how
immediate we can make our aid felt. No one can tell the exact
character of the emergency
situations that we may be called upon to meet. The Nation's
hands must not be tied when the
Nation's life is in danger. We must all prepare to make the
sacrifices that the emergency—as
serious as war itself—demands. Whatever stands in the way of
speed and efficiency in defense
preparations must give way to the national need.

A free nation has the right to expect full cooperation from all
groups. A free nation has the right
to look to the leaders of business, of labor, and of agriculture to
take the lead in stimulating
effort, not among other groups but within their own groups. The
best way of dealing with the few
slackers or trouble makers in our midst is, first, to shame them

73. by patriotic example, and, if that
fails, to use the sovereignty of government to save government.

As men do not live by bread alone, they do not fight by
armaments alone. Those who man our
defenses, and those behind them who build our defenses, must
have the stamina and courage



which come from an unshakable belief in the manner of life
which they are defending. The
mighty action which we are calling for cannot be based on a
disregard of all things worth
fighting for.

The Nation takes great satisfaction and much strength from the
things which have been done to
make its people conscious of their individual stake in the
preservation of democratic life in
America. Those things have toughened the fibre of our people,
have renewed their faith and
strengthened their devotion to the institutions we make ready to
protect. Certainly this is no time
to stop thinking about the social and economic problems which
are the root cause of the social
revolution which is today a supreme factor in the world.

There is nothing mysterious about the foundations of a healthy
and strong democracy. The basic
things expected by our people of their political and economic
systems are simple. They are:
equality of opportunity for youth and for others; jobs for those
who can work; security for those
who need it; the ending of special privilege for the few; the
preservation of civil liberties for all;

74. the enjoyment of the fruits of scientific progress in a wider and
constantly rising standard of
living.

These are the simple and basic things that must never be lost
sight of in the turmoil and
unbelievable complexity of our modern world. The inner and
abiding strength of our economic
and political systems is dependent upon the degree to which
they fulfill these expectations.

Many subjects connected with our social economy call for
immediate improvement. As
examples: We should bring more citizens under the coverage of
old age pensions and
unemployment insurance. We should widen the opportunities for
adequate medical care. We
should plan a better system by which persons deserving or
needing gainful employment may
obtain it.

I have called for personal sacrifice. I am assured of the
willingness of almost all Americans to
respond to that call. . . .

In the future days, which we seek to make secure, we look
forward to a world founded upon four
essential human freedoms.

The first is freedom of speech and expression—everywhere in
the world.

The second is freedom of every person to worship God in his
own way—everywhere in the
world.

75. The third is freedom from want—which, translated into world
terms, means economic
understandings which will secure to every nation a healthy
peace time life for its inhabitants—
everywhere in the world.

The fourth is freedom from fear—which, translated into world
terms, means a worldwide
reduction of armaments to such a point and in such a thorough
fashion that no nation will be in a
position to commit an act of physical aggression against any
neighbor—anywhere in the world.



That is no vision of a distant millennium. It is a definite basis
for a kind of world attainable in
our own time and generation. That kind of world is the very
antithesis of the so-called new order
of tyranny which the dictators seek to create with the crash of a
bomb.

To that new order we oppose the greater conception—the moral
order. A good society is able to
face schemes of world domination and foreign revolutions alike
without fear.

Since the beginning of our American history we have been
engaged in change—in a perpetual
peaceful revolution—a revolution which goes on steadily,
quietly adjusting itself to changing
conditions—without the concentration camp or the quick-lime
in the ditch. The world order
which we seek is the cooperation of free countries, working
together in a friendly, civilized
society.

76. This nation has placed its destiny in the hands and heads and
hearts of its millions of free men
and women; and its faith in freedom under the guidance of God.
Freedom means the supremacy
of human rights everywhere. Our support goes to those who
struggle to gain those rights or keep
them. Our strength is in our unity of purpose.

To that high concept there can be no end save victory.


[From The Public Papers and Addresses of Franklin D.
Roosevelt, vol. 9 (New York: Macmillan
Co., 1940), pp. 663ff.]