Total Marks 5

Starting Date Tuesday, November 24, 2020

Closing Date Monday, November 30, 2020
Status Open
Question Title GDB No. 01
Question PRODUCTION PLANNING & INVENTORY
Description
CONTROL (MGMT617)
 

GDB No. 1
Total Marks: 5

Objective:

To reinforce the concept of forecasting.

Scenario:

The demand forecast is usually based upon past data and other external
factors such as economic conditions, trends, fashions, seasons, and industry
estimates. The newly established businesses face a lack of past data which
results in a lack of accurate forecasts. Consider, XYZ is a small scale newly
established business firm in FMCG. Though the firm is new in the market,
it has a few direct and indirect competitors working in the market for many
years. The firm needs to identify the key areas that can be improved upon to
monitor and manage business expenses, sales trends, cash flow projections,
etc. For this an accurate forecasting method is needed for the firm.

Discussion Question:

Recall the methods of forecasting, suggest a reliable forecasting method for

XYZ firm with justification. Would you suggest to keep using the
forecasting method for years or change it over time? Justify your answer.

 
 Instructions:

 The length of your answer must not exceed “250” words. This does
not mean that the answer should be extended with unwanted details
just for the sake of completing “250” words.
 Avoid directly copying material from any source. Provide logical
points in your own words.
 Adopt a critical approach while answering the given question.
 Only logical and rational points supported by good reasoning will
be awarded marks.
 You are advised to be specific and avoid unnecessary details or
explanations as it can have negative impact on your scores.
 Copied material will be marked as ZERO.

 Since competition and retail channels are changing each year, planning for
the future requires an ongoing view of factors directly impacting your
business.
 For example, FMCG retailers and manufacturers are seeing that the speed
at which they can get products into consumers’ hands is directly impacting
sales.
 If FMCG companies do not have a clear understanding of their evolving
competition and channels, they’ll continue to miss out on opportunities to
grow.

Companies that can identify and proactively meet true market demand are

poised to take the lead in their markets. This is especially true in the fast-
moving consumer goods (FMCG) forecasting landscape, where customers
have a plethora of product, brand, and retail channel options available.
However, far too many companies are still looking backward, unable to
anticipate and plan for the future.
Future performance is driven by a multitude of factors,
from internal initiatives such as product innovation and marketing
to external drivers such as consumer spending power.
There are many factors to consider before being able to forecast volume for a new product
with reasonable accuracy, and even then many experienced marketers get it wrong as the
variables are many and some of them are simply unknown.

The factors to consider are:

1. Product features and quality vs competition

2. Brand Strength if it is a new product from an established brand

3. Advertising Investment to generate awareness and educate consumers on the features of

the new product

4. Price and Promotional strategy vs competition

5. Product test scores vs. competitive products based on formal research

6. Retail or distribution capability or customer (retailer) buy in of your products

7. Timing of launch if product is seasonal

8. And any other factors which are unique and category specific

Forecasting for fast moving consumer packaged goods has all the usual
challenges of demand forecasting, but is particularly influenced by the high
impact of promotional activity. 
Frequent promotional activity complicates the already difficult tasks of
historical data cleansing and seasonal analysis, then there is the task of
estimating the effect of future promotions and integrating them into the
forecast.
As in any company a choice has to be made regarding the time bucket to be
used in forecasting. 
The dominance of promotional forecasting in FMCG, together with the
likelihood of needing to integrate weekly customer forecasts into the short
term forecasting process tends to weigh somewhat towards the adoption of
weekly forecasting. 
A slight downside to this is that, with weekly forecasting, the important
matter of seasonal analysis can become more difficult and may need special
attention.
Forecast Solutions has successfully created forecasting solutions in Excel for
some small FMCG businesses, including a neat and convenient method for
dealing with historical and forecast promotions.  If the scale and complexity
of the forecasting process suggest that specialised software may be
beneficial, there is a packaged solution that we recommend, or we can help
in a software selection process.
 Recalling the methods of forecasting, I would suggest Delphi Method out of
Qualitative Techniques as a technique that relies on historical data would not be
useful in forecasting the future of a totally new product that has no history.
 Primarily, Qualitative Techniques are used when data are scarce.
 For example, when a product is first introduced into a market.
 The objective here is to bring together in a logical, unbiased, and systematic way
all information and judgments which relate to the factors being estimated.
 R&D demands are difficult to estimate, and where market acceptance and
penetration rates are highly uncertain.
 I would suggest that using the same forecasting method for years is not appropriate.
The same type of forecasting technique is not appropriate to forecast sales, say, at all
stages of the life cycle of a product so the overtime change is necessary.
 Since competition and retail channels are changing each year, planning for
the future requires an ongoing view of factors directly impacting your
business.


a reliable forecasting method for XYZ firm with justification. These differences imply
(quite correctly) that the same type of forecasting technique is not appropriate to
forecast sales, say, at all stages of the life cycle of a product—for example, a
technique that relies on historical data would not be useful in forecasting the
future of a totally new product that has no history.

Qualitative techniques

Primarily, these are used when data are scarce—for example, when a product is first introduced
into a market.

The objective here is to bring together in a logical, unbiased, and systematic way all information
and judgments which relate to the factors being estimated. Such techniques are frequently used in
new-technology areas, where development of a product idea may require several “inventions,” so
that R&D demands are difficult to estimate, and where market acceptance and penetration rates are
highly uncertain.