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Homework answers / question archive / Demand forecasting results in an estimate of future demand and gives an organization a basis for planning and making sound business decisions
Demand forecasting results in an estimate of future demand and gives an organization a basis for planning and making sound business decisions. Since the future is unknown, it is expected that some errors between a forecast and actual demand will exist, so the goal of a good forecasting technique would be to minimize the difference between the forecast and the actual demand. Address the following requirements: • • Articulate the difference in short and long-term forecasts, forecasting techniques, and the benefits and challenges of each technique. Create a forecast for a situation with which you are familiar (personal or professional) explaining the situation and why you chose the method of forecasting that you did. Demand forecasting results in an estimate of future demand and gives an organization a basis for planning and making sound business decisions. Since the future is unknown, it is expected that some errors between a forecast and actual demand will exist, so the goal of a good forecasting technique would be to minimize the difference between the forecast and the actual demand. Address the following requirements: • • Articulate the difference in short and long-term forecasts, forecasting techniques, and the benefits and challenges of each technique. Create a forecast for a situation with which you are familiar (personal or professional) explaining the situation and why you chose the method of forecasting that you did. PE 23. - The tower OPERATIONS MANAGEMENT WILLIAM J. STEVENSON Mc Graw Hill Education Operations Management
Discussion
Short-term forecasts primarily provide predictions about future trends in the near future, usually up to two years into the future. On the other hand, long-term forecasts provide predictions about events, outcomes, or trends for at least five to ten years into the future (Stevenson, 2018). As a result, these forecasts often focus on the general industry direction.
Various forecasting techniques can be used to predict future outcomes. They include straight-line techniques, moving averages, and linear regression techniques. The straight-line techniques assume a constant growth rate into the future to adjust current rates to predict future outcomes. For instance, a company may say that its sales will grow by 10% monthly over the next year. The moving averages are often used for repeated forecasts with sufficient historical data (Yuan et al., 2020). This technique can be used to predict sales volumes based on historical data about past sales in similar or nearly similar market conditions.
The regression techniques (simple linear and multiple linear regression) can be used to predict future outcomes by comparing independent variables with one or more dependent variables. These techniques require significant statistical knowledge to analyze the sample data.
Forecast example
If a store wishes to forecast its monthly sales for the next six months, it may use the moving averages to predict the sales volume. In this case, the store may decide to use a three-month moving average to predict the sales average for each of the next six months. The moving averages will be desirable because the store will only utilize its past sales data (historical data) for similar periods and estimate the probable sales volume over the next trading period. The moving average is also more likely to produce accurate forecasts than straight-line approaches and with ease than regression techniques.
