How do you respond to the below student discussion post? Forecasting Accuracy. H
ID: 453564 • Letter: H
Question
How do you respond to the below student discussion post?
Forecasting Accuracy. How accurate should a forecast be? How much should a company pay to obtain accuracy? How should a company justify additional costs (investment and operating) to obtain greater forecast accuracy?
What is more important, short term forecasting (e.g. week, month, quarter) or long term forecasting (e.g. year, 5-years)?
Forecasting Accuracy. How accurate should a forecast be? How much should a company pay to obtain accuracy?
Forecasts should be as accurate as possible. Proper forecasting helps you deal with unexpected swings in the economy. A manager should choose the best technique that provides the information in a timely manner that is value added. A company should not invest too much time and resources in a high tech forecasting technique that is too costly to get the information. But if a company desired more accuracy then they should consider having the right information.
How should a company justify additional costs (investment and operating) to obtain greater forecast accuracy?
Only if the ends justify the means. The company must show “that the capital required to improve forecast accuracy even slightly was significantly overshadowed by the benefit the company could gain from investing a similar amount of money and effort into improving manufacturing flexibility.” (Wong, 2013) Accurate forecasts allow a business to position itself competitively.
What is more important, short term forecasting (e.g. week, month, quarter) or long term forecasting (e.g. year, 5-years)?
Short term forecasting is important, because you can get up to date current information based on timely data where a company can meet the customers’ demands based on spending trends. It depends on the demand cycle and budget constraints whether a week, month or quarterly forecasting is the best business practice. It’s all about planning as well. The army has a long term forecasting business practice, which is on a fiscal year cycle, so expenditures associated with a project or training exercise can be allocated a head of time. A retail company might go the route of a short-term forecast due to weekly trends in fashion.
References:
Wong, J. (2013, April 12). Insights into Supply Chain and Operations Strategy. Retrieved April 30, 2016, from OPS Rule: http://www.opsrules.com/supply-chain-optimization-blog/bid/282916/Why-You-Shouldn-t-Waste-Effort-Improving-Forecast-Accuracy
Explanation / Answer
Forecasting Accuracy. How accurate should a forecast be? How much should a company pay to obtain accuracy?
Forecasts should be as accurate as possible. Proper forecasting helps you deal with unexpected swings in the economy. A manager should choose the best technique that provides the information in a timely manner that is value added. A company should not invest too much time and resources in a high tech forecasting technique that is too costly to get the information. But if a company desired more accuracy then they should consider having the right information.
How should a company justify additional costs (investment and operating) to obtain greater forecast accuracy?
Only if the ends justify the means. The company must show “that the capital required to improve forecast accuracy even slightly was significantly overshadowed by the benefit the company could gain from investing a similar amount of money and effort into improving manufacturing flexibility.” (Wong, 2013) Accurate forecasts allow a business to position itself competitively.
What is more important, short term forecasting (e.g. week, month, quarter) or long term forecasting (e.g. year, 5-years)?
Short term forecasting is important, because you can get up to date current information based on timely data where a company can meet the customers’ demands based on spending trends. It depends on the demand cycle and budget constraints whether a week, month or quarterly forecasting is the best business practice. It’s all about planning as well. The army has a long term forecasting business practice, which is on a fiscal year cycle, so expenditures associated with a project or training exercise can be allocated a head of time. A retail company might go the route of a short-term forecast due to weekly trends in fashion
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.