What are the laws of forecasting and what are their implications for operations and supply chain managers?
What will be an ideal response?c
Answer: Forecasts are almost always wrong; forecasts for the near term tend to be more accurate; forecasts for groups of products or services tend to be more accurate; and forecasts are no substitute for calculated values. The first law suggests that operations managers recognize that achieving a close estimate is beneficial, and that the amount of time, effort, and money required to improve a forecast have diminishing returns. The second law recognizes that the immediate future is more predictable and that techniques to shorten the time horizon for a forecast, such as delayed differentiation, are in the firm's best interest. The third law accounts for overforecasting and underforecasting errors to cancel each other. If a producer can standardize parts or models and delay differentiation, perhaps by making model differences attributable to software, then the effects of this law can be mitigated. Finally, if it is possible to directly calculate values, such as with dependent demand items, this should be done instead of forecasting.
You might also like to view...
Companies often receive feedback from user groups who form their own electronic clubs who can form a collective opinion and quickly supply information about new or developing products. These electronic clubs are known as:
A) kostenlos. B) listservs. C) gratis. D) umsonst.
It costs $10 to make a single unit using regular production and $15 to make a single unit using overtime production. Total overtime production is limited to 1000 units for the five month period
The manufacturing plant has a regular production capacity of 250 units per month and 225 units in inventory at the start of the planning period. There is a $5 per unit charge for holding inventory at the end of each month and a limit of 600 units ending inventory for any period. What is the minimum cost production plan if the forecast must be met? Month Forecast January 250 February 200 March 300 April 400 May 500 A) $15,850 B) $16,150 C) $16,500 D) $16,800