This ensures that you don’t stray far from the track, and accomplish all your set goals. Louis Allen defines forecasting, as “a systematic attempt to probe the future by inference from known facts.”. Forecasting requires information about various external and internal factors. Forecasting gets you into the habit of looking at past and real-time data to predict future demand. There are a number of advantages to using this method. Essays, Research Papers and Articles on Business Management, Business Forecasting: Meaning, Steps and Sources, Term Paper on Forecasting | Elements | Planning | Management, Forecasting: Meaning, Approaches and Techniques | Organisation, Techniques of Sales Forecasting | Production Planning, Advantages and Disadvantages of Franchising. Management may become so concerned with the mechanism of the forecasting system that it fails to question its logic. Topics: 8. Forecasting is the essence of planning because planning also aims at deciding what is to be done in the future. 6. Forecasting, Advantages and Disadvantages of Forecasting Methods in Operations Management, Advanced Planning and Scheduling (APS) software, manufacturing scheduling and planning software, Computerized Inventory Management Software, Create optimized schedules balancing production efficiency and delivery performance, Maximize output on bottleneck resources to increase revenue, Synchronize supply with demand to reduce inventories, Provide company-wide visibility to capacity, Enable scenario data-driven decision making. Report a Violation 11. Organizations that use forecasting methods primarily use it to implement production strategies that enable their facility to operate more efficiently and cost-conscious. Lyndall Unrwick defined forecasting as, it is involved to some extent in every conceivable business decision. Customer buying preferences, advertising effectiveness and is especially useful where the target market is small such as buyers of industrial products, and where the customers are co-operative. Forecasting your revenue for the upcoming year can help you budget your business expenses early on, providing you with a reliable forecast to compare your progress with. It enables a company to commit its resources with greatest assurance to profit over the long term. The Fundamental Elements of Forecasting in Operations Management. Sales representatives may poll their customers or potential customers about the future needs for the goods and services the company supplies. Thus, almost all units of the organisation are involved in this process, which provides interactive opportunities for better unity and coordination in the planning process. Time series analysis involves decomposition of historical series into its various components, viz., trend, seasonal variations, cyclical variations and random variations. It is an important and necessary aid to planning and planning is the backbone of effective operations. This is most commonly by analysis of trends. The sales people, being closer to consumers, can estimate future sales in their own territories more accurately. However, forecasting gives companies the ability to see into the future to avoid this hypothetical accident via more effective production schedulingto meet customer demands and mark… Production And Operations Management; Page 1; Production and Operations Management. You want an accurate forecast to inform your operations management. It enables a company to commit its resources with greatest assurance to profit over the long term. No one can see the future to know what sales will be, what will break, what new equipment will be needed, or what investments will yield. It facilitates development of new products, by helping to identify future demand patterns. So much of contemporary demand planning strategy can be compared to looking in a rearview mirror. By providing a logical basis for planning and determining in advance the nature of future business operations, it facilitates correct managerial decisions about material, personnel, sales and other requirements. Need and Importance of Forecasting UNIT 4 NEED AND IMPORTANCE FORECASTING Objectives After going through this unit you should be able to: • understand the concept of forecasting as applicable in production/operations management • appreciate its need • understand the length of future period of forecast as is related to the decision situation/purpose for which it is used. 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