LOVE. - Forecasting Essay Example | Topics and Well Written Essays - 500 words

LOVE. - Forecasting - Essay Example The most significant result of bad forecast is immense damage in the supply chain management system. If a company’s forecast is higher compared to the expected demand then it has to bear additional costs due to high level of inventory, useless products, and extra inventory carrying costs. Similarly, if the forecast of a company is lower than expected, it can make customers switch to the other companies. As a result, the company can face loss of competitive advantage in the market (Firestone, â€Å"How to Thrive with Inaccurate Forecasts†). In reality, forecasts cannot be 100% accurate; however, it should be able to provide an approximate picture about the future demand or trend in the market. Forecasting incorrectness imposes substantial effect on the demand planning of an organization. For instance, in service organizations, a bad forecast can possibly result in unnecessary workforce and redundant expenses, or insufficient workforce which can negatively impact on customers’ requests. Every organization, irrespective of size, maintains a buffer level which is preserved according to the demand, and bad forecasting can result in keeping a wasteful buffer level which is uneconomical for the organization (Voudouris, C. & Et. Al., â€Å"Service Chain Management: Technology Innovation for the Service Business†). There are several types of forecasts used by organizations for business, such as sales forecasts, financial forecasts, demand forecasts, supply forecasts, and economic forecasts among others. The most useful among them is the demand forecast. The reason is that numerous operations depend on accurateness of demand of any product or service, and through demand forecast, business organizations can prepare themselves accordingly. The demand forecast can determine the quantities which need to be purchased or made available in the organization’s stock or buffer in order to provide rapid service. In present day’s competitive environment, business