Engineering Management: Forecasting
Engineering Management: Forecasting
Schneider, & Gupta, 2016 state that forecasting is the ability of the management to make prediction about their organizational growth or capacity with the assistance of data. Market trend analysis is also imperative in the forecasting when past and present data are availed for analysis. Risk and aspects of uncertainty are common to forecasting. Within a business or organization, it is imperative for the management to conduct forecasting once in a while of periodically to examine the status of the firm, and the methods that it needs to employ in order to attain her objectives.
Many organizations use forecasting to budget, plan and estimate future growth of their business (Hyndman, & Athanasopoulos, 2018). It is therefore imperative to note that forecasting uses the insights of the management to predict their own market outcomes. There are two forecasting methods, judgment based of the gut feeling and the statistical feeling or the quantitative forecasting. Gut feeling is based on a person`s intelligence and monitoring of markets then offer a creative or innovative ideas on how to solve a problem. It mainly focus on intuition. Conversely, quantitative forecasting is based on collected data of past and present market trends. Critical analysis done and an informed opinion made about the data before a decision is made. However, it is essential to mention that such data at times have been also forecasted to give certain desired outcome.
A case study is of a company that had been suffering from consumer losses due to poor delivery of goods and services. The consumers used to make orders and their goods would arrive to them two days late from the date promised of delivery. The customers started to leave the consumption of the firm`s goods due to poor services. Additionally, the profit margins had started to depreciate and the firm was making loses. The competitors were narrowing down on such a faulty system of operations. Government policy of trade tariffs with Mexico, Canada, China and the European Union made the markets unpredictable and such market shocks affected the firm with uncertainty of the future.
The firm’s management under the engineering management commissioned for an internal audit to the operations under the supply chain management and the operations management. The audit established data and figures about production and supply chain management. It issues figures on wastages due to production and those due to supply chain management specifically delivery. The customer loses were quantified per day and those that the organization compensated.
The statistical data helped to inform the forecast management to make decisions on how to prevent further loses. Quantitative forecasting established that supply was a key problem. However, due to the gut feeling of the manager, he decided to use droned for faster delivery of goods which were argent and fragile. The drones helped to deliver customer requests within time. In addition, the fragile goods were not destroyed hence reducing damages thus reduces cost of compensation. The employee base was also reduced due to decrease in manpower needed. Therefore, forecasting was able to use both the quantitative or statistical approach to make decision and the judgmental-gut to solve the problem.
Hyndman, R. J., & Athanasopoulos, G. (2018). Forecasting: principles and practice. OTexts.
Schneider, M. J., & Gupta, S. (2016). Forecasting sales of new and existing products using consumer reviews: A random projections approach. International Journal of Forecasting, 32(2), 243-256.