Forecasting 's Long Term Strategy Essay

978 Words Oct 21st, 2016 4 Pages
Forecasting is central to the decision making process in an organization (Armstrong, 1988). Different forecasting methods such as econometric modelling can help shape a firm’s long term strategy (Naylor 1981). Accurate forecasts enable a firm to make important decisions at different stages of production, sales, promotion. (Danese, Kalchschmidt,2010). For instance, production planners can predict the level of demand in times of uncertainty. In a study conducted by Rothe, it was observed that 86% of the firms gave high importance to forecasting. However, one should be careful as forecasting can also have the opposite effect, leading to high uncertainty as seen in financial markets. This essay will evaluate the importance of forecasting to operational and financial management and will also explore how it affects the competitiveness of operations in an organization.
In Operations management literature, forecasting is viewed as “a distinct activity” which is integral to planning the quality of operations (Lee, Adam Jr, 1986). Forecasting is used across most companies in functional areas such as production planning, sales and budgeting, new product development and long term planning (Wisner and Stanley, 1994). Companies such as Krispy Kreme Doughnuts and Nestle optimize their operations using the monthly sales and yearly profits from the past data (Information week, 2003). The need for forecasting can be explained by the uncertainty of production process. Production managers…

Related Documents