For effective and efficient management of a business, forecasting and planning are crucial. A business involves many activities such as purchasing of materials, producing the goods and supplying it to the customers. All these activities have to be in-line to avoid any delays or inventory hoarding.
The main aim of a business is to attain high levels of profits and that is possible through optimal utilization of resources. This maximum utilization is possible through proper forecasting and planning of business operations in terms of demand, supply, lead times, etc.
Delegate your assignment to our experts and they will do the rest.
Traditional forecasting techniques are statistical techniques that incorporate the historical data and predict future based on that data (Prevedere, 2017). It also makes use of qualitative data in terms of opinions and judgments of market experts. These techniques are often used by companies to plan for future sales, production levels and procurements. However, in a real world, accurate forecasting is a complex task. Market circumstances and customer demands change over time and may not be predicted based on past data. In addition, experts may interpret information differently which can affect predictions. Therefore, inaccurate predictions are an inherent feature of traditional models. However, if traditional methods are used along with other analytical techniques, the forecasting can improve to a great extent (Bass, 2018).
After forecasting, a business has to plan for its resource allocation which is possible through operations management. Operations management involves processes from creating of products till delivering of products. It helps an organization in achieving its strategic objectives as well as controlling its operations and processes. It allows aligning of resources as well which results in timely procurement, production and delivery (Bass, 2018).
Forecasting and planning needs to be parallel in order to improve firm performance. Sometimes, if the appropriate planning has not been done, the actual results are different than the predicted ones. For instance, if a firm forecasts a certain sales volume but does not procure materials on time for the production to take place and the lead times of procurement, production and actual sale contradict, the delivery to customer might not happen. Therefore, it is significant that forecasting techniques and operations management are well-aligned.
Making time-line or Gantt charts is one effective way to plan all the activities and processes. The following chart presents a scenario of how processes are planned to make a timely delivery to customer.
Notes:
A five day working week has been assumed and any other holidays have been ignored.
The order was received on 1 st January, 2011 and was to be delivered on 31 st March, 2011.
Both processes of putting plastic covers and packaging take 1 day.
As the company wanted to deliver on-time as well as wanted to avoid any inventory or material build-up, procurements and production have been made based on the delivery date.
Although the order was received in the start of the year, the work on it started on 3 rd of February to meet the objectives of the company.
The process started with procurement of steel as it required four weeks and were required before the production could start on 3 rd of March.
The purchase order of plastic cover was made on 17 th February so that these are available on 9 th March. As the production completes on the same date, these plastic covers can be put on the widgets on 10 th March.
The purchase of cardboard boxes had to be made on 10 th of February to make them available on 9 th of March as they were required on 10 th March.
The order is dispatched on 11 th March so that it can be delivered to the customer on 31 st March, 2011.
Forecasting, without doubt, is an integral part of goal and objective setting. However, these objectives can only be met if planning and management of operations are conducted effectively. Use of timeline chart can help in setting realistic and necessary time frames for the processes and orders. In addition, it presents a clear picture of what is to be done and when so that the concerned departments can effectively carryout the required tasks (Project-Management.com, 2018). As the company is facing forecast accuracy of only 60 %, use of proper timelines might prove to be an effective strategy in improving performance of the company.
References
Prevedere. (2017, December 11 th ). Avoid These Outdated Demand Forecasting Techniques. Retrieved from: https://www.prevedere.com/avoid-outdated-demand-forecasting-techniques/. Accessed 8 th August, 2018.
Bass, B. (2018, July 27 th ). Advantages and Disadvantages of Forecasting Methods of Production and Operations Management. Retrieved from: https://smallbusiness.chron.com/advantages-disadvantages-forecasting-methods-production-operations-management-19309.html. Accessed 8 th August, 2018.
Project-Management.com. (2018, March 30 th ). Advantages and Disadvantages of Gantt Charts. Retrieved from: https://project-management.com/advantages-and-disadvantages-of-gantt-charts/. Accessed 8 th August, 2018.
