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Operation Managemnt

This document discusses different types of forecasting methods used in business. It provides examples of how forecasting was used successfully in various industries: 1) A beverage brand used forecasting models to predict sales and avoid overproduction, saving $9 million per year. 2) An electronics company used forecasting to identify profitable markets for a new device and avoid releasing a failed product. 3) A convenience store chain used demand forecasting to reduce inventory costs and improve profits by accurately stocking high demand products.

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Ameer Hamza
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72 views

Operation Managemnt

This document discusses different types of forecasting methods used in business. It provides examples of how forecasting was used successfully in various industries: 1) A beverage brand used forecasting models to predict sales and avoid overproduction, saving $9 million per year. 2) An electronics company used forecasting to identify profitable markets for a new device and avoid releasing a failed product. 3) A convenience store chain used demand forecasting to reduce inventory costs and improve profits by accurately stocking high demand products.

Uploaded by

Ameer Hamza
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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National University of Modern Languages


Lahore

Assignment3
Production and operations management
Submitted to
Sir Sami-Ullah
Submitted by
Ameer Hamza
Roll No#
L-1213
M.com (4)-M
Date 4/12/2020
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Forecasting:
Forecasting is a technique that uses historical data as inputs to make informed estimates that
are predictive in determining the direction of future trends. Businesses utilize forecasting to
determine how to allocate their budgets or plan for anticipated expenses for an upcoming period
of time. This is typically based on the projected demand for the goods and services offered.

Forecast in manufacturing environment:

Forecasting is the starting point for all push processes of the supply chain. They are used for
material planning, procurement, inbound logistics, and manufacturing. On the other hand,
the forecast helps to optimize the inventory levels and to increase the usage of
the factory capacity.

Forecasting in the Service Sector:

Forecasting in the service sector presents some unusual challenges. A major technique in the
retail sector is tracking demand by maintaining good short-term records. For instance, a
barbershop catering to men expects peak flows on Fridays and Saturdays. Indeed, most
barbershops are closed on Sunday and Monday, and many call in extra help on Friday and
Saturday. A downtown restaurant, on the other hand, may need to track conventions and holidays
for effective short-term forecasting.

Which forecast method is best and why?

Qualitative and quantitative methods often complement each other. Qualitative method allow 1
to use their judgment and subjective knowledge in forecasting. One can make good use of
qualitative method especially when data are sparse quantitative analysis.

Quantitative method relies on past data and tries to model complex and dynamic situation.
Economic and business models can be tested, and policy analysis can be done using a whole
system o equation. Quantitative method tend to explain past behavior well, butt forecasting is a
different problem.
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Example of forecasting of failure or success of organization:

Beverage brand:

A global alcohol brand, needed to predict upcoming sales at the SKU level to make smarter
planning decisions for manufacturing its key product line. In the past, the company relied on its
historical data alone to decide the products and quantity to manufacture and deliver to its
distributors. Using this method, the company tended to overproduce as a safety net, wanting to
avoid the risk of shortages and consumers being forced to purchase a competing product at all
costs. When the company turned to Prevedere, it began building its own market demand
forecasting models on a weekly basis. As a result, executives could make better staffing and
purchase decisions for raw materials that were needed to produce their beverages.

Bottom line:

The company saved $9 million per year by simply avoiding over-production with accurate
demand forecasts.

Electronics Company:

An electronics company, wanted to gain a competitive advantage and increase its market share
by releasing the latest and greatest mobile device. Historically, the company had largely relied on
guesswork and expensive market research in planning new product releases, and that approach
didn’t always pay off. The company had previously released a new product that had not met
sales predictions, and it could not afford the same mistake again. To avoid the risk of releasing a
product that would fail to meet demand, which would ultimately lead to millions of dollars down
the drain in R&D, manufacturing, and marketing, the company turned to Prevedere. With our
help, the electronic manufacturer’s marketing department was able to incorporate factors like
consumer sentiment, retail sales, and projections, as well as housing starts and employment rates,
to identify markets and demographics that would be most appealing for its new mobile device.
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Bottom line:

The electronics company was able to not only distinguish profitable markets for its new mobile
device but also identify the least profitable markets to exit.

Convenience Store: 

Executives at a convenience store chain knew they needed to reduce inventory costs and improve
the bottom line, but they didn’t have the sophisticated tools or internal knowledge to make the
accurate forecasts necessary to meet these objectives. The company turned to us, where we
began by looking at the chain’s major product categories: dairy, alcohol, candy, snacks, and
tobacco. We examined each category on a national level to determine what was driving the
demand for these products. From there, we dove into a more granular level, taking in economic
factors for certain markets such as employment and cost of living to build predictive models.
With this information, the grocery chain was able to build predictive models for each of its
market areas, which procurement used to stock shelves with the goods consumers were ready
and able to purchase.

Bottom line:

Market demand forecasting accuracy helped the grocery chain avoid losing millions of dollars
related to inventory overages on products like milk, candy, beverages and more.

Stocks have reached what looks like a permanently high plateau.

The greatest on the list of infamous predictions on the stock market came from Irving Fisher, the
man whom legendary economist Milton Friedman called "the greatest economist the United
States has ever produced".

Fisher, who made significant contributions to concepts such as utility theory and general
equilibrium, said this three days before the Black Thursday crash in 1929 plunged America into
the Great Depression.
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