Business forecasting

In making decisions that guide company actions, managers need to make inference about the future. They must decide whether to offer standard or custom goods or services, what features the goods or services will have, in what territories they will be offered, and many other matters. To a large degree a success of any business depends on a forecast of market acceptance. A forecast is an inference of what is likely to happen in the future. Although it is extremely rare for a forecast to be exactly right, forecasting is very important.

The forecast provides a basis for coordination of plans for activities in various parts of the company. When all parts of the company base their work on the same forecast, they prepare for the same future and their efforts are mutually supportive. In a manufacturing company, for example, the personnel department can work to obtain the right number of employees with the right mix of skills. Purchasing can contract for the proper amounts of raw materials and purchased components. Finance can estimate the income that will be generated by sales and can determine the capital required, so that they can arrange to obtain any necessary funds at the appropriate times and at reasonable rates. The forecast is therefore a vital basis for the coordination of the plans of various elements within a company. It is important that a forecast be made and that all parts of the company work from the same assumptions about the future.

Forecasting is important in different functions within an organization. Long-range, intermediate and short –range decisions must be made, and all require some inference about the future. Forecasting is basic to operations decisions because projections 1) indicate when decisions are needed, 2) determine which alternatives are reasonable, and 3) help to indicate which alternative solution to a problem should be selected.

Demand forecasts are particularly important to operations managers because managers seldom control demand yet have the responsibility of providing goods and services in response to it. Demand forecasts also are basic inputs to financial plans, personnel plans, facilities plans, and marketing plans.

Companies often have short- to intermediate-range forecasts of demand for specific products or product families. These specific forecasts are used to plan production, to procure inputs, and to schedule transformation of those inputs into products or services. Specific forecasts may be updated with a frequency of a week to a month. Longer-range forecasts may be made quarterly or annually to aid in making long-range plans for facilities, research and development projects, and marketing strategies.

Assignment 3. Answer the following questions.

1. What is a forecast? What kind of process is forecasting?

2. What role does a forecast play in the activities of a company?

3. How do different departments within a company use forecasts?

4. Why is forecasting particularly important in decision making?

5. In what way do operations managers depend on demand forecasts in their work?

6. How do forecasts differ in time horizon?

7. How often are forecasts updated?

8. What period do long-range forecasts cover?

Assignment 4. Translate into Ukrainian.

To a large degree; what is likely to happen; to be exactly right; personnel department; income that will be generated by sales; at the appropriate times; at reasonable rates; the same assumptions about the future; alternative solution to a problem; in response to demand; specific products or product families; to schedule transformation of inputs into products or services; research and development projects.

Assignment 5. Translate into English.

Робити припущення щодо майбутнього; пропонувати стандартні товари або товари на замовлення; надзвичайно рідко; їхні зусилля взаємно підтримують одне одного; сировина та закуповувані компоненти; прийняття виробничих рішень; менеджери виробництва; прогнозування попиту є основною інформацією для планування виробничих потужностей; прогнози можуть переглядатись з частотою від тижня до місяця; слушна кількість співробітників з відповідним набором навичок.

Assignment 6. Match the synonyms. Use any 5 words in the sentences of your own.

A: forecast, inference, update, appropriate, basic, yet, response, procure, skill, aid, coordinated;

B: help, competence, mutually supportive, although, answer, proper, essential, projection, review, assumption, obtain.

Assignment 7. Match the opposites. Use any 5 words in the sentences of your own.

A: standard, approximately, long-range, specific, rare, seldom, response, input, updated, diversify;

B: exactly, outdated, coordinate, often, output, general, short-range, custom, usual, question.

Assignment 8. Choose the proper word to complete the sentence.

1. The decision to offer custom products depends on (general/specific) demand forecast. 2. Forecasts that cover a period of three months are (monthly/quarterly) projections. 3. The activities of various elements within accompany must be (mutually supportive/diversified). 4. Operations managers control (demand/ output), i.e. they have the responsibility of (providing goods or services/ estimating the income). 5. It is extremely (often/rare) for a forecast to be (exactly/approximately) right.

Assignment 9. Match the word with its explanation.

Assumption	Inference of what is likely to happen in the future.
Judgment	Something thought to be true but not proved.
Forecast	A guess about a future amount based on information available at present.
Projection	Opinion formed or given after consideration.

Assignment 10. Use the proper word from exercise 9 to complete the sentences below.

1. Make no … before looking at the evidence. 2. He always examines the situation in all its details so that his … are the most reliable. 3. Due to technological improvements we have started to produce 550 units daily. According to my … we can still increase our productivity. 4. Have you heard the weather … for the coming summer?

Assignment 11. Logically organize the following sentences to make up the text. Give the title to the text. Translate the text.

1. Methods of the first group are called subjective, qualitative, opinion-based, or judgmental forecasts.

2. That is, a forecast can be developed through either a subjective approach or an objective approach.

3. Forecasting is an art or a special skill rather than an exact science.

4. They are called quantitative or statistical forecast methods or models.

5. The key inputs of a science are constant laws of nature.

6. Methods of the second group are based on the use of some mathematical formulas.

7. The key inputs of forecasting are information, analysis, experience, and informed judgment.

8. Forecasting methods are numerous, ranging from spur-of-the-moment hunch to complex mathematical equations.

Assignment 12. Make up word partnerships and explain their meaning. Use them in the sentences of your own.

n+n: accuracy, demand, market acceptance, model, trend, weather;

Дата добавления: 2014-11-29