Jam Althea O.

Agner
OPMATQM 490
UNIT 2 ACTIVITY PART 1
Question:
1. Omar has heard from some of his customers that they will probably cut back on order
sizes in the next quarter. The company he works for has been reducing its sales force due
to falling demand and he worries that he could be next if his sales begin to fall off.
Believing that he may be able to convince his customers not to cut back on orders, he
turns in an optimistic forecast of his next quarter sales to his manager. What are the pros
and cons of doing that?
Forecasting gives you an insight on the future outcome and gives you an opportunity to
make adjustments or correct errors wherein the company would be able to anticipate on the
consequences and address it effectively. It would also teach Omar things what to do and not
to do by looking at his/her past mistakes. Omar would develop a habit of looking in to his/her
previous performance and assess to which measures he/she should focus on. By doing
forecasts consistently, it should eventually be more precise. If forecasts are done properly, It
will likely decrease the company’s costs since the consequence is already evident to them
and perform proper decision making on what to do and increase efficiency rather than
wasting resources. These are true for the most part only when forecast is near-accurate, but
forecasts aren’t really 100% accurate. Forecasts are used to help with decision making but it
doesn’t mean that Omar should believe that the result of a forecast is guaranteed to happen.
Omar should still think and decide critically and consider other aspects that might affect the
end result. Forecasts are also time-consuming. The time you spend on forecasting can be
used on other more important things such as selling or marketing your products. Data
collection, organization, and planning are all aspects of forecasting. Companies will hire a
team of demand planners who will be in charge of creating the forecast. Demand planners
would need a significant amount of information from sales and marketing departments in
order to perform this role effectively. It is also not unusual for processes to be manual and
labor-intensive, resulting in a significant amount of time being spent. By doing all of this,
forecasting would be very costly. If Omar wants the forecast to be as accurate as possible,
he/she have sacrifice time, money and resources to do so.