LOVE. - Forecasting - Essay Example

Forecasting Table of Contents Forecasting Table of Contents 2 Question 3 Question 2 4 Works Cited 6 Question In business, forecasts are typically major inputs for satisfying the demand of customers by providing adequate supply. Unless an organization measures correct forecast, it will be unable to provide appropriate products or services, which would result in delay in operation and customer dissatisfaction. Generally, forecast is just a guess for future occurrences, and despite using best computer systems and best applications, the forecast can be wrong.

In certain circumstances, forecast can fluctuate unusually with the market phenomenon which makes it a bad forecast. The most significant result of bad forecast is immense damage in the supply chain management system. If a company’s forecast is higher compared to the expected demand then it has to bear additional costs due to high level of inventory, useless products, and extra inventory carrying costs. Similarly, if the forecast of a company is lower than expected, it can make customers switch to the other companies.

As a result, the company can face loss of competitive advantage in the market (Firestone, “How to Thrive with Inaccurate Forecasts”). In reality, forecasts cannot be 100% accurate; however, it should be able to provide an approximate picture about the future demand or trend in the market. Forecasting incorrectness imposes substantial effect on the demand planning of an organization. For instance, in service organizations, a bad forecast can possibly result in unnecessary workforce and redundant expenses, or insufficient workforce which can negatively impact on customers’ requests.

Every organization, irrespective of size, maintains a buffer level which is preserved according to the demand, and bad forecasting can result in keeping a wasteful buffer level which is uneconomical for the organization (Voudouris, C. & Et. Al., “Service Chain Management: Technology Innovation for the Service Business”). Question 2There are several types of forecasts used by organizations for business, such as sales forecasts, financial forecasts, demand forecasts, supply forecasts, and economic forecasts among others.

The most useful among them is the demand forecast. The reason is that numerous operations depend on accurateness of demand of any product or service, and through demand forecast, business organizations can prepare themselves accordingly. The demand forecast can determine the quantities which need to be purchased or made available in the organization’s stock or buffer in order to provide rapid service. In present day’s competitive environment, business organizations require to respond quickly in any situation of rising demand to take advantage of it.

Instead of waiting for demand to arise and accordingly respond to it, business organizations prefer to react instantly as any demand appears so that they can successfully get more customers and increase the turnover. Companies which provide rapid services to the customers’ demand tend to make a strong position in the market by conquering over other competitors. Thus, appropriate demand forecasting is useful for business organizations which can result in efficient business operation and high level of customer satisfaction.

Bad demand forecast certainly lead to unproductive and high operational expenses. In business environment, the most significant step for improving the efficacy and usefulness of organizational procedure is appropriate demand forecast. The capability of a company to forecast demand precisely provides the opportunities to maintain the expenses at the optimum level by optimizing the production or workforce quantity, streamlining the logistics, and planning the future business strategies (Ted Yale University, “The Importance of Demand Forecasting”).

Works CitedFirestone, Erin. “How to Thrive with Inaccurate Forecasts”. February 23, 2012. Rethinking Supply Chains, 2008. Ted Yale University. “The Importance of Demand Forecasting”. February 23, 2012. Demand Forecasting, No Date. Voudouris, Christos. & Et. Al. Service Chain Management: Technology Innovation for the Service Business. Springer, 2008.