Management

CO4: Examine methods for measuring forecast performance
CO5: Investigate forecast performance utilizing spreadsheet techniques
Forum Prompt:

In addition to reading your assigned resources for week 1, research each of the three topics regarding the organization you currently work for, or previously worked for:

1) From the viewpoint of your organization, discuss the concept of demand as it applies to your organization.

2) Next, choose a resource or activity that is forecast in your organization and address why achieving results significantly different than the forecast can be a potential problem for your organization.

3) How does (or should) your organization measure forecast accuracy? What would you do differently to improve forecast accuracy in your organization.

{“””This week, we head into Chapter 4 to study Measuring Forecast Performance. Our textbook author gives us a simple formula for Forecast attainment (FA = Actual performance/Forecast X 100). Looks simple, doesn’t it, but there is more to measuring a forecast’s performance that dividing what got done by what we thought should get done and multiplying by 100; but it is a start.

There is a very important lesson, our author puts it best, “what gets measured gets fixed, and what gets fixed gets rewarded” (Chase, 2013,p. 103). I think you will find this is an interesting and a not too technically challenging week of study.”””}

just need 250-300 words

Demand Forecasting

Answer

Demand Forecasting

Demand is a business principle that refers to the consumers’ desire or want to purchase goods and services willingly and pay a price for specific goods and services. With all other factors holding constant, an increase in the price of a commodity or service decreases the quantity demand by consumers, while a decrease in price results in an increase in the quantity demanded. Companies spend a lot of resources forecasting the amount of demand that the public has for their services and products. It is important for a business to determine how much of its goods customers will buy at a given price. Incorrect forecasting either results in money being left on the table if the business underestimated or losses if the business overestimated. Without demand, businesses would not produce or sell anything.

In the organization that I previously worked for, the management was involved in forecasting the demand for cables, which were the primary product that we produced and sold. The forecast is important since it determined the number of cables that would be produced every month and every shift. An overestimation of the market demand would result in overproduction, which would result in losses. An underestimation of the market demand would result in a large number of customers not being served. To measure the accuracy of forecasts, the organization can calculate forecast attainment using the formula: Forecast Attainment = (Actual demand/Forecast demand) × 100 (Chase, 2013). If the forecast attainment is high, then the forecasts are accurate. The organization should aim to achieve 100% forecast attainment – where actual demand is equal to forecast demand.

References

Chase, C. W. (2013). Demand-driven forecasting: a structured approach to forecasting. John Wiley & Sons.