2. A Case Study on
M&L
Manufacturing
Regarding Forecasting
3. Forecasting is a decision-making tool used by businesses
to help in planning and estimating future growth.
Forecasting is the attempt to predict future outcomes based
on past events.
FORECASTING
4. M&L Manufacturing makes various components for printers
and copiers. In addition to supplying these items to a major
manufacturer, the company distributes these and similar
items to office supply stores and computer stores as
replacement parts for printers and desktop copiers. In all, the
company makes about 20 different items. The two markets
(the major manufacturer and the replacement market) require
somewhat different handling.
For example, replacement products must be packaged
individually whereas products are shipped in bulk to the major
manufacturer.
CASE
5. The company does not use forecasts for production planning.
Instead, the operations manager decides which items to
produce and the batch size, based on orders and the amounts
in inventory. The products that have the fewest amounts in
inventory get the highest priority. Demand is uneven, and the
company has experienced being overstocked on some items
and out of others. Being understocked has occasionally created
tensions with the managers of retail outlets. Another problem is
that prices of raw materials have been creeping up, although
the operations manager thinks that this might be a temporary
condition. Company bears a loss of $6 million in one year.
CASE
6. Primary forecasting techniques help organizations plan for
the future.
Some are based on subjective criteria and often amount to
little more than wild guesses or wishful thinking.
Others are based on measureable, historical quantitative
data and are given more credence by outside parties, such
as analysts and potential investors.
While no forecasting tool predict the future with complete
certainty, they remain essential in estimating an
organization’s forward prospects.
Forecasting Techniques
8. The RAND Corporation developed the Delphi Technique in
the late 1960s. In the Delphi Technique, a group of experts
responds to a series of questionnaires. The experts are kept
apart and unaware of each other. The results of the first
questionnaire are compiled, and a second questionnaire
based on the results of the first is presented to the experts,
who are asked to re-evaluate their responses to the first
questionnaire. This questioning, compilation and re-
questioning continues until the researchers have a narrow
range of opinions.
Delphi Technique
9. In Scenario Writing, the forecaster generates different
outcomes based on different starting criteria. The decision-
maker then decides on the most likely outcome from the
numerous scenarios presented. Scenario writing typically
yields best, worst and middle options.
Scenario Writing
10. Subjective forecasting allows forecasters to predict outcomes
based on their subjective thoughts and feelings. Subjective
forecasting uses brainstorming sessions to generate ideas
and to solve problems casually, free from criticism and peer
pressure. They are often used when time constraints prohibit
objective forecasts. Subjective forecasts are subject to biases
and should be viewed by decision-makers.
Subjective Approach
11. Time-series forecasting is a quantitative forecasting
technique. It measures data gathered over time to identify
trends. The data may be taken over any interval: hourly;
daily; weekly; monthly; yearly; or longer. Trend, cyclical,
seasonal and irregular components make up the time series.
Time-Series Approach
12. Helps to Predict The Future.
Keep Your Customers Happy.
Learn From The Past.
Keeps Companies Looking Ahead.
Save on Staffing Costs.
Remain Competitive.
Reduce Inventory Costs.
Benefits of Forecasting
13. Because of competitive pressures and falling profits, the
manager has decided to undertake a number of changes.
One change is to introduce more formal forecasting
procedures in order to improve production planning and
inventory management. With that in mind, the manager wants
to begin forecasting for two products. These products are
important for several reasons.
SOLUTION
14. First, they account for a disproportionately large
share of the company’s profits.
Second, the manager believes that one of these
products will become increasingly important to
future growth plans; and
After using forecasting techniques, company
declines its loss from $6 million to $1 million in next
year.
SOLUTION
15. Businesses should use Forecasting Techniques to forecasts
about their future to make their business profitable, to make
their customer satisfied and to remain competitive in market.
With the help of forecasting techniques businesses diminish
the chances of loss.
CONCLUSION
Editor's Notes
RAND corporation is an American non-profit global policy think tank created in 1948 by Douglas Aircraft company to offer research and analysis to the United States Armed Forces.