Lack of Forecasting

Last week, we had an in class activity about a Chicago Manufacturing company that was supplying printers, copiers, and replacement parts. The manager of this company was reluctant about forecasting on it supplies. As we all know, forecasting is very vital for every company if it wants to succeed.  When a company fails to forecast, it either end up with a shortage of inventory or overstock of inventory. Any of these can have an adverse effect on the company. Shortage could lead to loss of customer, which will lower revenue and eventually lead to smaller profit margin.  Likewise, overstock would lead to tying up of working capital, and cost of storage which will lead to higher cost, and smaller profit margin.  This manager’s attitude towards forecasting reminded me of my own passed experience.

Once I owned a retail shop selling only soft drinks. I registered with four different beverage manufacturing company. The following are the companies I was doing business with, Coca Cola Company, Pepsi Cola Company, Club Cola Company, and Malta Guinness Company. All these companies are solely on cash bases, they do not accept credit sales.  Also, they supplied me on weekly bases, and on different days. Whatever sales I made, when a particular supplier came I used that money to buy that company’s products. What I was forgetting was that, all the sale does not belong to only that one company, but to all the four companies. At the end of the week I end up having either shortage of overstock inventories. My case was not reluctant towards forecasting, I was actually not thinking, and did not have any idea about operation management. I realized it only when it was too late, by then I had lost most of my valuable customers.  

Although there are different types of forecasting, I could have simple used the demand forecast to forecast for my business supply since it was on weekly bases. Demand forecast would have helped me in predicted which of the four products were selling fast and which ones were selling slowly. Then I would have adjusted my style of inventory taken. Hence, it would have safe the business because it was really in a very good business location, and also, my initial sales were fabulous.

Forecast is not only an important part of every business, but also to our everyday life activities. It is one of the reasons why we always listen to the weather. In that case we can prepare adequately to what the future holds for us. Does anybody agree with me about forecasting being an important part of our daily life? Also, do all companies/businesses that lack forecasting fail? 

 

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