Description
Reply to Forecasting Discussion 2
Q – Please read the discussion below and prepare a Reply to this discussion post with comments that further and advance the discussion topic.
Discussion
Forecasting Technique Selection
As it is a manufacturing industry, and in particular, laptop manufacturing needs to have supplies for manufacturing on demand to avoid a delay in the manufacturing process due to the unavailability of supplies, exponential smoothing will be my preferred method for forecasting. This method is applicable because it can easily change with the flow of demand patterns (Lectures Notes, n.d.). The traits of the method are suitable as it is something very important, especially for industries that are constantly evolving, like the manufacture of laptops. Exponential smoothing is also easier to apply, needs less historical data than other methods and incorporates the most recent observations giving it the advantage in industries with fluctuating demand.
Steps in the Forecasting Process
The first step is to define the objective. It involves specifying what one wants to forecast, and in this case, it is the future laptop sales. The step also involves setting the forecast time horizon. The second step is the collection of data, where historical information about laptop sales volume, the market in general, its fluctuations, and external conditions such as the current rates of inflation are collected. Analysis of the collected data is the third step. In this step, data is analyzed in an attempt to establish trends, patterns, and any other irregularities that might influence the forecast. The forecasting method is selected in the fourth step and applied to generate the forecast in the first step. The final step involves comparing the forecast with the actual performance and revising the forecasting model when new data is obtained to monitor it.
Importance of Forecasting for the Correct Period
Making a forecast for the right period is very important because it will enable the organization to order raw materials and labor in the right quantity so as not to overstock while at the same time not underestimating the quantity needed. This is because an accurate forecast enables one to make a better plan in procurement, production, and managing inventory so as to meet the demand of the market. It also ensures demand matches supply to avoid shortage or excessive resources.
What Happens When a Forecast Is Created For 3 Months When an Organization Needs an Accurate Forecast For 6 Months?
When an organization needs an accurate forecast for 6 months, and it is created for three months, it is likely to suffer adverse consequences. One of them is the organization may not have sufficient raw materials to continue production after three months, resulting in stock out. Inadequate inventory can lead to delays as well. On the other hand, the organization will be left with unused stocks if demand is overestimated. It would be consuming capital that could have been employed elsewhere besides incurring additional storage expenses. It can also lead to increased costs as frequent changes to production plans and supply orders result in higher production costs and fines from suppliers or customers. Choosing the proper method for forecasting and making sure that the forecast relates to the right period will help organizations optimize their performance to meet the needs of customers and gain a competitive edge.
Q – Please read the discussion below and prepare a Reply to this discussion post with
comments that further and advance the discussion topic.
Please provide the references you used.
Ensure zero plagiarism.
Word limit: 200 words
Discussion
Forecasting Technique Selection
As it is a manufacturing industry, and in particular, laptop manufacturing needs to have supplies for
manufacturing on demand to avoid a delay in the manufacturing process due to the unavailability of
supplies, exponential smoothing will be my preferred method for forecasting. This method is
applicable because it can easily change with the flow of demand patterns (Lectures Notes, n.d.). The
traits of the method are suitable as it is something very important, especially for industries that are
constantly evolving, like the manufacture of laptops. Exponential smoothing is also easier to apply,
needs less historical data than other methods and incorporates the most recent observations giving
it the advantage in industries with fluctuating demand.
Steps in the Forecasting Process
The first step is to define the objective. It involves specifying what one wants to forecast, and in this
case, it is the future laptop sales. The step also involves setting the forecast time horizon. The
second step is the collection of data, where historical information about laptop sales volume, the
market in general, its fluctuations, and external conditions such as the current rates of inflation are
collected. Analysis of the collected data is the third step. In this step, data is analyzed in an attempt
to establish trends, patterns, and any other irregularities that might influence the forecast. The
forecasting method is selected in the fourth step and applied to generate the forecast in the first
step. The final step involves comparing the forecast with the actual performance and revising the
forecasting model when new data is obtained to monitor it.
Importance of Forecasting for the Correct Period
Making a forecast for the right period is very important because it will enable the organization to
order raw materials and labor in the right quantity so as not to overstock while at the same time not
underestimating the quantity needed. This is because an accurate forecast enables one to make a
better plan in procurement, production, and managing inventory so as to meet the demand of the
market. It also ensures demand matches supply to avoid shortage or excessive resources.
What Happens When a Forecast Is Created For 3 Months When an Organization Needs an Accurate
Forecast For 6 Months?
When an organization needs an accurate forecast for 6 months, and it is created for three months, it
is likely to suffer adverse consequences. One of them is the organization may not have sufficient raw
materials to continue production after three months, resulting in stock out. Inadequate inventory
can lead to delays as well. On the other hand, the organization will be left with unused stocks if
demand is overestimated. It would be consuming capital that could have been employed elsewhere
besides incurring additional storage expenses. It can also lead to increased costs as frequent changes
to production plans and supply orders result in higher production costs and fines from suppliers or
customers. Choosing the proper method for forecasting and making sure that the forecast relates to
the right period will help organizations optimize their performance to meet the needs of customers
and gain a competitive edge.
References
Che-Jung CHANG, Guiping LI, Jianhong GUO, & Kun-Peng YU. (2020). Data-driven forecasting model
for small data sets. Economic Computation & Economic Cybernetics Studies & Research, 54(4), 217–
229.
Lectures Notes. (n.d.). Chapter 3 PowerPoint Presentation.
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