Manalad, Aidynn Aireel

BSBA BE 3-1

Test 1.

1.What are the main advantages that quantitative techniques for

forecasting have over qualitative techniques? What limitations do
quantitative techniques have?
Quantitative approaches stress objective measurements and
statistical, mathematical, or numerical analysis of data acquired via
polls, questionnaires, and surveys, as well as modifying preexisting
statistical data using computational tools. The majority of quantitative
procedures involve evaluating objective or hard facts. Personal biases
are usually avoided. It is feasible to handle crucial data in a
systematic manner and to generate trend extrapolation.To make
forecasts, qualitative forecasts solely rely on judgment and opinion. As
a result, when adopting quantitative techniques, organizations rely on
historical data or create associative models that seek to foresee using
random variables. It also primarily entails the analysis of objective or
complex data. As a result, firms that use quantitative procedures see
more accurate outcomes than those who use qualitative techniques.
Computerization is a natural fit for quantitative approaches. Personal
biases are modest, and they may force managers to quantify
information.
Because not everyone is comfortable working with or
comprehending statistical data, it can obstruct communication with
less numerate audiences.

2. What are some of the consequences of poor forecasts? Explain.

Poor forecasting results in poor business decisions, which can
sometimes have disastrous consequences.You won't be able to
comprehend your customers, making it difficult to create products
that suit them or forecast what they'll buy at any particular time. You
may not be able to meet your sales goals as a result of this. Optimistic
forecasts often imply that the company expects demand to be much
higher than it actually is, leading to a high inventory and retailers
needing to discount products to clear the shelves.If the forecast is too
pessimistic, the opposite is true. This indicates that the project
demand is significantly less than the actual demand. Poor planning
wreaks havoc on operations, limits growth, and tarnishes your brand's
reputation.

3. List the specific weaknesses of each of these approaches to

developing a forecast: a. Consumer surveys. b. Salesforce composite. c.
Committee of managers or executives.
First is the Consumer Survey or Consumer Polls Most surveys
include a high number of participants, and it is impossible to contact
each and every consumer or potential consumer. As a result, some
sampling is carried out, and the survey results are based on this
smaller sample size. Second is Salesforce Committee, While
salespeople and the sales force program can reveal crucial information
that firms might otherwise withhold, many salespeople bring their
own biases and personal baggage with them. This might potentially
have a detrimental impact on the composite's output. As a result, any
composites/forecasts released by sales force will almost certainly need
to be vetted and fact-checked by a senior management and this is may
have a result of a method of anticipating future demand for a product
by adding up what each salesperson anticipates to be able to sell in
his or her territory.Staff workers may be unable to tell the difference
between what a customer wants to accomplish and what they will
actually do. They can also be swayed by recent events, such as
products with low sales or high sales for an extended period of time.
Third is the Committee of managers or executives that has
disadvantage like delay. Its the biggest disadvantage of a committee
structure is the time it takes to make decisions. In meetings, a
number of people voice their points of view, and it takes a long time to
reach a resolution. The scheduling of committee meetings takes time
as well. The meeting's agenda is published, and a convenient date is
set. The decision-making process is extremely slow, and delayed
decisions may result in the loss of many commercial possibilities. In
committee meetings, some members try to exert dominance. They
strive to impose their point of view on others. Some members' hostility
aids them in gaining the majority's support, while minority viewpoints
are ignored. This style of decision-making is not in the organization's
best interests.

4. Forecasts are generally wrong. a. Why are forecasts generally wrong?

b. Explain the term “wrong” as it pertains to a good forecast.
Forecasts are frequently erroneous due to the application of an
improper model, random variance, or unforeseen events. Predictions
are infamous for being wrong. Some have even suggested that a chimp
with a dart board could make a reliable prediction. Despite the fact
that forecasting has gotten more scientific and statistical in recent
years, it is still constrained by the forecaster's and methodology's
constraints. Compensation can be offered if these flaws can be
detected, but recognizing them is not always straightforward.

5. What is the purpose of establishing control limits for forecast errors?

Accurate forecasting aids in the management of your supply
chain, inventories, workforce levels, finances, and other aspects of
your business. Forecasting also has significant drawbacks, such as
depending on prior figures, which might be erroneous if market
conditions change suddenly, and faulty information from employees
and customers.When the forecast errors merely show random changes,
forecasts are frequently deemed satisfactory. A control chart is a tool
for detecting non-randomness. The control chart's upper and lower
control limits are useful since they show the upper and lower limits of
the allowed variance range.The major benefit of forecasting is that it
gives the business with useful information that it can use to make
decisions regarding the organization's future. In many circumstances,
forecasting is based on qualitative data and expert judgment.

Test II

1. Explain the trade-off between responsiveness and stability in a

forecasting system that uses time-series data.

Responsiveness and stability are inversely related: the most

responsive data is the least stable, while the least stable data is the
most responsive.Time Series is a useful technique when we believe
demand follows certain repeating patterns

2. Who needs to be involved in preparing forecasts? 3. How has

technology had an impact on forecasting?

For many years, technology has been the primary driver of

change in men's lives. Managers in both public and private companies
have only recently grasped the need of anticipating technological
development and its impact on their operations. Economic, market,
and financial projections, as well as weather forecasts, have all
become common management tools. Technological projections do not
have to predict the exact form technology will take in a given
application at some future date to be valuable. Forecasts are used by
senior managers and finance teams to create and analyze financial
strategies, maximize production, and assess demands and logistics. A
forecast can assist in making crucial resource allocation and overhead
level decisions in a firm, such as people, rent, utilities, and other
overhead.

Test III

1. It has been said that forecasting using exponential smoothing is

like driving a car by looking in the rear-view mirror. What are the
conditions that would have to exist for driving a car that are
analogous to the assumptions made when using exponential
smoothing?

Well, gathering information doesn’t work with only one

viewpoint but need to consider and be aware in every perspective
around one person. In relating to forecasting that projections cannot
be created precisely since there are a number of elements and
changes in the current environment that generate variances in
forecasts and force a manager to revise the forecasts just like being a
driver that you are not the only one who has access in the road you
are taking or you are not the only one who is speeding up just to
reach your destination immediately, everyone is having their own
thoughts, opinions, ways, suggestions, overview towards one things
and you need to consider all of this when releasing a forecast.
Everyone understands where one should gaze when driving a car.
Most of the time, I'm looking straight ahead, with occasional side
glances. It's a good idea to check your rear-view mirror every now and
then. To produce forecasts, every quantitative forecasting approach
always needs previous data. Exponential smoothing is a forecasting
technique that removes the impact of any random deviations in the
data trend.

2. What capability would an organization have to have to not need

forecasts?

Leadership or the ability to handle a bunch of people with one

purpose or goals. We frequently associate leadership with a group of
people at the top of a company, but it is a skill that can and should be
found at all levels. Leadership is defined as the ability to inspire and
motivate others to achieve a goal. At the top of the organization,
leadership entails leading others, and at the bottom, it entails
influencing others. The leadership performance of your company
percent has a lot to do with how much the organization can do in a
certain amount of time. Collaboration. The ability to work productively
with others is referred to as collaboration.

3. When a new business is started, or a patent idea needs funding,

venture capitalists or investment bankers will want to see a business
plan that includes forecast information related to a profit and loss
statement. What type of forecasting information do you suppose would
be required?

A business plan is a written document that outlines a

company's primary business operations, objectives, and strategies for
achieving those objectives. An executive summary, products and
services, marketing strategy and analysis, financial planning, and a
budget should all be included in a good business plan. Business plans
are used to convince potential investors to invest in a start-up or a
new invention. A business plan is used to promote a product or
service to investors and persuade them to provide funds to make it a
reality. Potential investors would want to see if a new service or
product has a profit potential. Profit predictions, new product/process
cost estimations, productivity adjustments, energy and raw material
costs and availability, and economic indicators would all be needed in
the forecasting data.

4. Discuss how you would manage a poor forecast.

If the poor forecast has an impact on capacity requirements,

how you handle it will depend on your ability (or incapacity) to change
capacity in the short term, or find other uses for an oversupply, or
find other ways to compensate for an under supply. Using inefficient
instruments and focusing on the incorrect issues are all examples of
poor forecasting methodologies. Many businesses still use manual or
semi-automated forecasting technologies like Excel spreadsheets,
which are inefficient. Begin by establishing a baseline. Accurate
forecasting is founded on a solid foundation.Concentrate on the most
important aspects. Focus on the most important data when
forecasting.Begin at the bottom and work your way up. When making
forecasts, you have the option of working from the top down or from
the bottom up.Be thorough and use good tools. Focus on the
customer: You can't go wrong with this approach. Maintain a network
design that is optimized for your customers and the ways in which
they wish to receive and consume your goods.

5. 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?

6. Give three examples of unethical conduct involving forecasting and

the ethical principle each violates

Taking shortcuts to finish a task by compromising its quality in

order to fit within the scheduling routine is a common example of
unethical scheduling behavior. It entails the ethical notion of sticking
to a schedule and scheduling according to the needs. Another
unethical practice is not paying employees for the time they give to the
job due to a variety of causes, resulting in unethical behavior. Using
corporate time for personal gain. Misusing business time is at the top
of the list, whether it's covering for someone who is late or
manipulating a time sheet. Lastly is Abuse of Power.