Forecasting Assignment Narrative
Forecasting Assignment
Forecasting as a Process, not a Hunch
Generally speaking, managers are faced with decision situations in which they should obtain complete and perfect information and eliminate uncertainty, however evaluating data rationally and logically is the toughest part of the decision-making process and that is where forecasting comes into play. The process of utilizing business forecasting is critical to a company’s production or operations department regardless of whether a company sells goods or services. A company must have a clear picture of how many of those goods or services it can sell, in both short and long terms. It also must look at material that must be obtained, provision for adequate production facilities, labor that must be hired and trained, and the use of logistics services to avoid bottlenecks in distribution of the products and services to the consumers, all these functions can’t be preformed without an effective forecasting process. If this is accomplished correctly, an accurate prediction of demand can be made in a timely and efficient manner, keeping not only the business partners satisfied, but the customers as well.
Eight Step Forecasting Process
Before I get into my discussion on comparing and contrasting forecasting methods, I think it is important to briefly explain the “eight step forecasting process” (Render, Ch 5), which is considered a formal roadmap to assist the manager for whom a business forecast usually means an intuitive guess. The steps are listed below:
1. Determine the use of the forecast
2. Select the items or quantities to be forecasted
3. Determine the time horizon of the forecast
4. Select the forecasting method(s) that fit your business given your constraints and limitations.
5. Gather the data needed to make the forecast
6. Validate the forecasting model
7. Make the forecast
8. Implement the results
Determining Time Horizon
In reviewing this eight-step forecasting
Forecasting as a Process, not a Hunch
Generally speaking, managers are faced with decision situations in which they should obtain complete and perfect information and eliminate uncertainty, however evaluating data rationally and logically is the toughest part of the decision-making process and that is where forecasting comes into play. The process of utilizing business forecasting is critical to a company’s production or operations department regardless of whether a company sells goods or services. A company must have a clear picture of how many of those goods or services it can sell, in both short and long terms. It also must look at material that must be obtained, provision for adequate production facilities, labor that must be hired and trained, and the use of logistics services to avoid bottlenecks in distribution of the products and services to the consumers, all these functions can’t be preformed without an effective forecasting process. If this is accomplished correctly, an accurate prediction of demand can be made in a timely and efficient manner, keeping not only the business partners satisfied, but the customers as well.
Eight Step Forecasting Process
Before I get into my discussion on comparing and contrasting forecasting methods, I think it is important to briefly explain the “eight step forecasting process” (Render, Ch 5), which is considered a formal roadmap to assist the manager for whom a business forecast usually means an intuitive guess. The steps are listed below:
1. Determine the use of the forecast
2. Select the items or quantities to be forecasted
3. Determine the time horizon of the forecast
4. Select the forecasting method(s) that fit your business given your constraints and limitations.
5. Gather the data needed to make the forecast
6. Validate the forecasting model
7. Make the forecast
8. Implement the results
Determining Time Horizon
In reviewing this eight-step forecasting