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Forecasting is the art and Science of predicting future. It is an art because it can be done through subjective methods i.e. through intuition; through observation and it is Scientific because it can be done through scientific statistical models. Forecasting is the basis cooperate long term and is vital for every business organization and for every significant management decision. In the functional areas of finance and accounting, forecasting provide the basis for budgeting, planning and cost control. Marketing relies on sales forecasting to plan new products, compensate sales and make other key decisions.
Some reasons for Forecasting in Production and operation management
i. New facility Planning
It can take as long as 5 years to design and build a new factory or design and implement a new production system/ process. Such strategic activities in POM require long range forecasts for existing and new product so that operations manager can have necessary lead time to build factories and stall process to produce products and services when needed.
ii. Production Planning
Demands for products and services vary from one month to month. Production rates must be
scaled up or down to meet these demands. It can take several months to change the capacities of production process. Operations manager need intermediate range forecasts so that they can improve the production capacity to satisfy this.
iii. Workshop Scheduling
Demands for products and services vary from work to work. The work force must be scaled up
or down to meet these demand by using overtime layoffs or hiring and firing. Operations
managers need short range forecast so that they can have lead time necessary to provide work
force changes to produce and to meet the weekly demand.
iv. Financial Planning
Sales forecasts are driving force in the financial budget control process, the process that is used by so many operations to plan and control the financial performance of the production department.
NatalieR answered the question on June 10, 2022 at 13:19
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