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Operation Management: Forecasting
Operation Management: Forecasting
Operation Management: Forecasting
What is forecasting.
Every manager would LIKE to know exact nature of future events to accordingly PLAN when sufficient time is there to implement The effectiveness of his plan depends on level of accuracy with which future events are known to him. Try to forecast future to the best of his ability, judgement, and experience. Process of estimating a future event by casting forward past data. The past data are systematcially combined in a predetermined way to obtained estimate of the future. Prediction is the process of estimating a future based on subjective considerations other than just past data, need not be predetermined way.
Estimate of future values of certain specified indicators relating to decisional/ planning situation. Some situation single indicator is sufficient. The no.of indicators and the degree of forecast depends on the intended use of forecast. How much far in future ?? Should be sufficiently in advance so as to enough time for decision plan & put that plan operational. Forecast >or= time taken for preparation of plan + time taken to implement the plan.
Forecast in POM
Importance of forcast lies in its ability to help manager to take better actions regarding future. Advantages with forecase as follows. 1. Manager is better informed to set up objectives more clearly. 2. Thinking, generation, choice of alternatives more focussed. 3. Sufficient time is available, possible to organsie and implement his action in better way. FORECAST ERROR Value forecast value actually happening. Sophosticated models reduce error. Again trade off between choice of model and cost.
Capacity planning
Intermediate operations planning Short run production adjustement Scheduling production Product development.
Long term money market, interest rate One or more year. trends.
Intermediate demand shift in preferences. Short term demand, short term material/ input protections. Order position Long term sales trend decline stage, technological development in related fields. Upto about 2 years. About 6 weeks. Usuallly 1 week. 2 years and more