Forecast is something we revolve around on a daily basis. It is around us so much, that sometimes we forget how big of a role forecasts play in our lives. For example, a weather forecast could mean very little to an individual before he/she steps outside the house however, on the other hand it could mean a lot to a company who has spent over $100,000 to organize an outdoor event.
When we look at a specific trend in the market, we will predict the future. This prediction leads to a forecast. In most cases forecasts are far from what actually takes place however, in some cases they are accurate and close to accurate.
I believe that forecasts should be done considering all the factors. It does not always have to be positive which is why being too optimistic about the future can cause problems for a company. I worked for a retail company last year where some important decisions were made based on forecasts. One of such decisions included how many people to schedule for work on a particular day. For example if the sales on Saturday were forecasted to be high then more employees were called that day to work but on the other hand if sales were forecasted to be low, less employees would be working. An advantage of that for the company was saving cost however, the biggest drawback was that forecasts are not always accurate. On a Monday, they forecasted fewer sales and only a few employees were working but more customers showed up and it got difficult to manage for those few employees.
Companies make daily decisions based on forecasts. These would include how much inventory should be kept, how many employees should be hired. These decisions are more crucial than they appear. If the company is not prepared for the “what if’s”, then they are at big disadvantage, especially if they are in a competitive environment.
We are living in a technological world where forecasts play a huge role however, with the high advancement in technology, things are more unpredictable than they seem and the forecasts tend not to be very accurate. For example an article on www.bloomberg.com , “HTC Cuts Sales Forecast on Competition from Apple, Samsung”, talks about how the sales forecast had to be changed, in this case lowered, because Apple and Samsung had growing sales and had forecasted higher growth. Like I mentioned earlier we live in a world of forecasts. One forecast is based on another. In this case, HTC’s sales forecast was affected by the sales forecast of Apple and Samsung.
The question I would like to ask you is, have you ever been in one or more situations where you based a decision on an inaccurate forecast? How did it affect you?
Above article taken from http://www.bloomberg.com/news/2011-11-23/htc-cuts-sales-forecast-on-competition-from-apple-samsung-1-.html
Forecasts does play a huge role in making an important decision. I can’t think where I based my decision on an inaccurate forecast at any of my jobs, but I have been in a situation where by former boss made an inaccurate forecast similar to your example with scheduling employees. In my case, there were too many employees scheduled on a slow day which my boss had to send a few employees home for the day.
I agree that forecasting is a critical part of operations management. A company must be able to predict trends and forecast costs and staffing needs. At my work, we use forecasting daily as a part of the management routine to forecast who we will need to hire based on the time of year and who we have recently fired or lost.
I can relate to your retail situation. I work in retail and not too long ago we switched over to a new scheduling system which calculates how many transactions are made each day at each register to forecast how many employees should be working and at what hours. There have been many occasions where too many employees have been scheduled or not enough. When inaccurate forecasting occurs all employees are affected. Accurate forecasting is important, but in retail with so many other factors that play a role (like weather, Chicago events) it is hard to always be accurate. It is frustrating at times, but understandable.
I personally have never made a forecast at any of my jobs. However, I have worked in retail as well. The Christmas season was always hard to forecast because of the weather and the crowds would come and go at different times, we would be slow for hours then a huge rush would come in after my boss had sent some employees home. It makes for a stressful time, however, if you have worked in retail for years I guess you just grow accustom to faulty forecasts.
Without forecasting, running a successful company would be quite difficult. I currently intern for an investment consulting firm and forecasting is a huge part of what our CFA’s do to predict future market trends, prices, etc. For instance, I have inaccurately “forecasted” the number of people who were supposed to show up for a house party and it essentially lead to a fire hazard.
I agree with your statement that forecast is everywhere in our daily life and forecast have a big influence on business decisions. For myself, I could not go out if I didn’t check the weather forecast just to make sure I am not wearing too much or too little. While forecast plays an important role in business, it can affect how a business decision would be made. Good forecast can make a company runs better, a bad forecast may case a huge loss. Although it is impossible to make a perfect forecast, we still should try to take everything into account to make our forecast better.