In retail or in manufacturing industries, it is important for the business to pr

Question

In retail or in manufacturing industries, it is important for the business to prepare for inventory levels to ensure the business is optimally sizing the inventory with anticipation of customer demand. Forecasting with time-series is one effective method that could be used to visually represent historical data and anticipate future measurements. Time-series forecasting is the use of a model to predict future values based on previously observed values.

Question: identify a business case and apply a forecasting method that you would use to provide further insight into the business. Which forecasting method would you use to help management visualize the activities of their business, and why?

Explanation / Answer

For businesses, it is valuable to realize the importance of forecasting as a tool for decision-making processes. Managers can make use of these techniques, provided the presence of ample amount of data collected by them, in order to, be able to facilitate the algorithms that form the core structure of the forecasting techniques in general.

For a retail business, it is necessary to identify the level of the requirement of inventory based on the demands of the customers. We can, for example, use data mining and data warehouses that deal specifically in client-based information in order to acquire the raw data that is useful for the process of obtaining the data for the forecasting method to then facilitate the process. A retail company can receive the most benefits if they utilize the fixed model time series. In this forecasting technique the data collected represents the data from the past sales and the amount of inventory required in order to facilitate the sales factor for the organization would come from the average values of the past customer purchase data.

The business can then utilize just in time inventory in conjunction with an automated replenishment system which further enhances the company's ability to create an optimized inventory and allows the company to be able to reduce the gap in their lead time, product inventory gaps as well as reduce their holding costs in general.

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