Benefits of formalized approach to forecasting
Formalized forecasting has massive benefits which involves the ability of the management of an organization to plan inventory levels, shift or add labor, decrease or increase production and determine whether or not to order raw material. It is also vital to mention that forecasting is a fundamental factor which affects the cost of raw materials and shipping cost such as petroleum increase, tax fluctuations and other overheads incurred by an organization. The margin or profitability of a firm is determined by the latter. On the same note, the overall productivity of a firm is also dictated by the ability to carry out thorough business forecasting.
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The posterior demand of a product is a major consideration that is shaped by various types forecasting methods. This can equally enhance the process of evaluating the anticipated value of a product. Therefore, effective planning and shrewd utilization of the available resources can be put in place. In this case, forecasting limits inconveniences caused by delay of delivery of products to customers.
This is through the number of products required and the arte of producing them at the right time. It also factors in number of units to be produced, the inventory, cash flow, and amount of money that will be used for the process. Hence, augmenting distribution process and minimizing challenges associate with inventory are among the major attributes of business forecasting. The latter is also a vital business undertaking that makes it possible for firms to organizations to execute proper planning. The strategic supply chain management also requires effective business forecasting.
Prepare a weekly forecast for the next four weeks for each product. Briefly explain why you chose the methods you used.
In order to prepare a weekly forecast for roses, it is crucial to employ a simple method of time series. Using the latter approach, it is indeed possible to determine the forecast for the next four weeks. From the 14th week data, the sales result is 3.457. The latter is then multiplied by the number of weeks and then the value +48.28 is added. These forecasts will appear as demonstrated below. It will adopt the formula used for the 4 weeks within a period of four weeks. Hence, from the 15th to 18th week, the forecast is demonstrated below based on the data obtained from previous weeks.
Following falling profits and pressure from rising competition, I would adopt the market based sales forecast for Gold Coast blossoms. This will be based on market research to determine how much to produce and to sell. The figures will be above value based sales forecast.
This method helps find breakeven sales figures by dividing annual overheads by profit gross margin (selling price-direct cost *100). I will be able to determine the forecast for the next four weeks. From the 14 week data, the sales result will appear as demonstrated below.
William, Stevenson. Operations Management with Student DVD and Powerweb, 11th Edition, Boston: McGraw-Hill Irwin Publishing, 2005.Print.