Forecasting Methods
Forecasting demand is not an easy task. The market is constantly changing and it makes the product demand difficult to predict. Therefore, there is not such as perfect product forecast of what customers will need in the future. However, there are several methods that help attenuating the uncertainty of forecasting demand. Since, the forecast methods or techniques differ from one another; the objective is to compare and contrast several forecasting methods, and how they are used by organizations to the best advantage under conditions of uncertainty.
One of the forecasting techniques typically used by organizations is the historical analogy. Chase et al. (2005), define that historical analogy "ties what is being forecast to a similar item" (p. 514). This technique is used when the company is planning to launch a new product to market. Since there is no data available for the new product, the organizations try to compensate the uncertainty by using data from product with similar characteristics. Similarly, the market research technique also uses data collection to forecast demand. The data collection is primarily done through direct surveys and interviews. Companies use this technique to be able to come up with better products than the existing ones. The uncertainty of what customers want or dislike is reduce by collecting data directly from them. It is common for organizations to hire external companies to conduct this investigation and to provide the forecast. Since the external organizations are solely dedicated to the forecasting business; they usually provide adequate and accurate information.
The collaborative or consensus forecast technique has several similarities with the historical analogy. In their article, Helms et al. (2000) mentioned that, "Collaborative forecasting is one of the ways that many companies have found to overcome some of the inherent problems with traditional forecasting and at the same time support the supply chain management initiative of their companies. Collaborative forecasting is a method in which the knowledge and information that exists internally and externally is brought together into a single, more accurate, forecast that has the support of the entire supply chain" (p. 395). In the consensus method, all members from the supply chain have an active participation in the development of an adequate forecast. The panel consensus method uses open meetings where all participants provide or exchange ideas. In addition, instead of only relying on historical data, the consensus method goes one step further.
Although it could be risky to enter a new market with an existing stuff but, the industry can use market researchers to collect information from customers by studying customer buying patterns and using tools like customer survey and focus groups (Bodner, 2011). They can also use reverse engineering by disassembling their major competitor‟s product to analyze its design features by using their R & D
Addressing the trials of operating in a continually changing environment and realizing forecasts can only
Understanding the changes in the market and the growth of e-commerce prompted the organization to invest heavily in its supply chain management forecasting and management system. The development of a network of distribution centers and Direct Fulfillment Centers to position the company to capitalize on the growing e-commerce market indicate a strong understanding of the need to adapt to changing market forces. The company spent over $300 million on new distribution center facilities in 2014 alone, and continues to expand to maintain efficiency in product movement (Cassidy,
These documents bring in revenue through a subscription-based system that allows for forecasts of sales based on historical and growth analysis. The development (or iteration) of the new system was approved due to successful budgetary results over the previous two years and growth trends expected over the next two years. Additionally, ongoing maintenance on the system as problems began to arise was beginning to negatively influence production performance, and a need to iterate the system to incorporate evolving production goals was identified. The successful budget of the previous years encouraged the approval of replacing the current conversion system with a successor that promises to increase production performance while lowering the fixed costs of salaried programmers needed to maintain it. References Marshall, M.H., McManus, W.W., Manyer, V.F. (2003).
Management experience will also play a large role in the success of the forecast. The current team is quite new and will gain some needed experience over the next year in the hopes of staying on track for success. The ability of management to ensure product is readily available for the client, their training techniques with new and seasoned associates, and general management style will ensure success or spell defeat for the store.
Target Corporation needs to increase product availability based on the customer needs using a forecasting and supply chain
This method is something that many organizations are relying upon today. In fact, well over 30% of organizations state that they rely on data analysis for the majority of their marketing
So how can they predict consumer reaction to something like our marketing efforts, when consumer decisions are not absolutely based on logic? As it is they need to identify some sort of constant on which we can base our predictions, given a set of pre-determined reactions.
Once the market research data is compiled, it is then evaluated and upon which recommendations and conclusions about are drawn. This includes how the design of the product would look like, its price, initial niche markets, etc.
...om product forecasting exercise, this will help customers in getting a better deal from suppliers (Mellahi, K., Johnson, M., 2000).
PepsiCo used three sales and demand forecasting methods. The casual method, time-series method,and qualitative method. The casual method uses the assumption that the demand forecast is correlated with environmental factors such as the economy, product pricing , and interest rates. The time-series method uses past demand data as the forecast for future demands. The qualitative method uses past demand data and market intelligence. Management uses their own judgement to make the forecast and a yearly demand plan is forecasted with subplans made accordingly.
In other words, it aims to link all the supply chain agents to jointly cooperate within the firm as a way to maximize productivity in the supply chain and deliver the most benefits to all related parties [2].
One of the first steps to becoming a competitor is the widespread use of modeling and optimization. Instead of following basic statistical information, it is wise to look for ways to enhance profitability. To become successful at this, organizations use both internal and external information retrieved from outside sources for a vivid understanding of their consumers. Secondly, an enterprise approach is necessary. Through this approach, employees become proactive at finding out what items or processes are effective.
Briefly it is a systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation facing the company, allows management to make the changes necessary for better results through adopting a proactive approach. Therefore, if a company wants to know what type of products or services would be profitable it should make a market research. Furthermore, a comprehensive research will enable the company to know about the product imperfections (if there are) and to know if it has been able to satisfy customers’ needs. It attempts to provide accurate information that reflects a true state of affairs. Due to market research the company can formulate a viable marketing plan and estimate the success of its existing plan. There are two main sources of marketing research information:
In this case, Heineken long lead-time from order to delivery prohibits the company from being flexible and adapting quickly to market demand fluctuation. Therefore the implementation of an innovative Internet system called HOPS, would improve its supply chain performance by reducing the lead-time from order to delivery. In 1996, distributors and sales representatives had to plan out orders three months ahead of delivery, it was daunting task for them to predict the factors that would affect the product sales such as weather, special promotions, and local demand fluctuations in advance.