Supply forecasting notes

1. The OECD (Organization for Economic Cooperation
and Development ) Jobs Study , Observed that the
major cause of rising unemployment and the
incidence of low-wage jobs was the gap between the
need of OECD economies to adapt and the ability of
governments to implement the necessary changes.
The Jobs Study recommended measures to combat
unemployment including macroeconomic policies
promoting growth and job creation; technological
development and entrepreneurship; increasing labor
market fexibility; strengthening active labor market
policies; and improving labor force skills.

2. Manpower Supply
• Manpower supply is then the totality of manpower employed and manpower unemployed but
seeking jobs.
 Stock and flow: Flow dimension refers to manpower supply over a period of time, say over a five
year plan period. Stock dimension, on the other hand, denotes manpower supply at a particular
point of time like a target data of an economic plan
 Quantity and quality: Quantitative dimension of manpower supply indicates the number of persons
available with the requisite qualifications/skills, both employed as well as unemployed and seeking
jobs. Qualitative dimension comes into play when characteristics of manpower supply, such as,
specialisation; level, duration and quality of training; length of job related experience; and aptitude
and motivation are being considered.
 Occupation and education: Occupation is a description of the functions role to be played.. There
are some occupations – such as, physicians – which are uniquely related to a given occupation.
There are the other occupations which do not have any precise relationship with education.
 Macro and Micro: Macro level manpower supply at any future date consists of: current stock of
manpower, additions to current stock from new entrants or re-entrants, and subtractions due to
death, retirement, migration, mobility, and withdrawal from labour force. Micro level manpower
supply, on the other hand, comprises: external supply caused by recruitment, and internal supply
resulting from transfers, promotions and redundancies.

3. MACRO FORECASTING
• Direct Method- Census count can be usually obtained from the
Population Census
• Indirect Method-Estimation of manpower by the indirect method
thus involves the following steps:
 Estimating active life span (average age at entry into the
occupation, and average age at retirement from the occupation, )
 Determining base period (Base period can be determined by
subtracting the number of years in the active life span from the
target year)
 Forecasting annual institutional out-turn (forecasts of out-turn, with
the help of observed trends in annual rates of completion of the
educational level concerned. )
 Estimating attrition rate- (Attrition in the manpower supply- Death
Retirement Migration Occupational mobility)

4. Obtaining cumulated out-turn adjusted for
attrition- Given the base year manpower
supply (S0), manpower supply in the first year
after the base year (S1) is determined as:
a Attrition rate
Y1 = Institutional out-turn in
the first year after the base
year.
For Cumulative out turn adjusted for attrition=
Previous year man power supply * (1-Attrition rate)/100+ Institutional out
turn

5. Estimating manpower supply- Cumulated out-
turn adjusted for attrition, obtained in the
manner outlined above, indicates the total
number of persons in the population with the
requisite education/training.

6. MICRO FORECASTING
• Internal
• External
• External Manpower supply- (i) Recruitment (ii)
Deputation (Seconding, mainly in Government
Organization)
• Internal Manpower Supply-
 The internal supply depends on Wastage – the out-
movement from the organization caused by voluntary
resignation, death or retirement.
 Internal movement resulting from transfers and
promotion

7. Wastage and Stability of Manpower
• Analysis of Wastage- British Institute of
Management (BIM) index
Manpower Leaving In a Year × 100
Average Manpower in a position
• Stability Index-
rate of retention-
This Formula calculates the percentage of people
who stayed for more than a year.
Modified Stability Index- Bowey’s stability index
may be expressed as:

8. Human Resource Inventory
It is essential to categories the existing
employees into various groups on the basis of
Age, skill, functions, length of service,
Departments, Salary groups, Different levels in
hierarchy etc.

9. Factors affecting internal levels human
resources inventory
Promotions
Redeployment
External hiring
Mergers and
acquisitions
Human resources
Inventory
Promotions
Redeployment
Voluntary separations
Retirement
Involuntary separations
Sabbaticals, Long
Illness, Deaths etc.

10. Employee turnover Analysis
Employee turnover may be calculated for each
Department/ Level of
Performance/Reasons/Entry group etc

11. • Cohort Analysis- Manpower cohort in an organisation is a
group of staff who are more or less homogenous and who
joined the organisation at the same time.
In each cohort the peak of leaving occurs shortly after joining
when either the manpower leaving realises that the job is
not suitable to them or the employers find out that the
leavers are not suitable to the organisation.
Graphical presentation of leavers (those leaving the
organisation at each point of time from the date of joining
to the date by which the entire cohort would have
disappeared) resembles Figure I
By plotting cumulative percentage of leavers in the cohort on
the vertical axis and logarithm of time on the horizontal
axis the curve in Figure I becomes a straight line as in Figure
II.
Forecasts of percentage of total leavers of a particular cohort
at any future date can be made through extrapolation.

13. • Census Method- Some of the problems of
cohort method can be overcome by using the
census method. Under the census method a
snapshot of the total situation is taken at a
particular point of time or over a short period
of time and data on leavers with completed
length of service is obtained. Based on such
data, it is possible to estimate – with the help
of standard statistical techniques – the
proportion of manpower joining at a given
point of time who will survive to a specified
length of service.

14. Analysis of Internal Movements
• Vertical movements are the movements
between categories or levels of manpower
employed caused by either promotion or
demotion.
• Horizontal movements are movements
between locations or divisions within the
same category or level of manpower which
are caused by transfers

15. Markov Chain Mode
• A very useful method of analysing and
forecasting internal movements is the Markov
Chain Model. It calls for the estimation of
transition probabilities relevant to each
vertical and horizontal movement.

17. At the end of first year the position at
Level II
Level 1 Level 2 Level 3
Current strength of Employees 40 60 30
Rate of Annual employee
Turnover
20% 15% 10%
Percentage of Promotions to
next grade
60% 10% 5%
(i)After Employee turnover (15%) = 60×0.15 = 9 will exit
(ii) Promotion = 60×0.1 = 6 will be promoted to level III
(iii) Promotion from Level I = 40×.6= 24
Total employees at Level II= [60-(9+6)]+24 = 69