Importance of Forecasting in Manufacturing

When you see a product on the shelf, it represents the end result of a complicated business process that began once upon a time with an idea. That idea was transformed into a business plan, which then went through a metamorphosis into an engineering specification for a product as well as a pipeline design document, a market analysis, a production schedule chart, a logistics spreadsheet and finally a bunch of shipping manifests. This entire process may take years, which means inventory forecasting is one of the most vital pieces of the manufacturing process. If you do not get the forecast right, you end up with too many products that no one is buying, or not enough to meet an ever-expanding demand.

You Want it When?

An online MBA program can offer a comprehensive suite of skills related to inventory forecasting, pricing case histories, production pipeline optimization and risk and benefit costs analyses — as well as exercises in business cycles and consumer shopping forecasting. Getting a product into customers’ hands is a lot more complex than merely expecting them to grab one off the shelf. Many people have to touch the product before the customer can actually get their hands on it. Inventory forecasting suggests the rate at which consumers will purchase products, as well as the recommended restock rate. It is not just a matter of having a ship date for a product; you also have to know all the other milestones to reach before that product can arrive.

Making a Book

Books, for example, start with writers having ideas. They write those ideas down, and then sell the books to a publisher, who, in turn, edits it so that it reads well for its intended audience. A professional designer must then lay out the text, and an artist must create a cover. There are now at least four people involved in the process, and this process takes anywhere from several months to a year. Once a prototype of the book exists and the author is happy, the book must go to the publisher’s sales team who takes it out to the various bookstores that will sell the book, and booksellers read the book to see if they are interested in carrying it (another few months). Then, the book goes to the printer, which prints, collates and binds the book. The printer sends the books to a distribution warehouse, which, in turn, fulfills the orders that bookstores have placed (another few months). Finally, nearly a year later, the author has finished the book, a customer can walk into a bookstore and buy it, and everyone hopes that the topic of the book is still something that interests readers.

Checking the Forecast

The ultimate price of a product is indelibly tied to the materials and manufacturing costs that a business incurs as it moves the product through its production pipeline. Inventory forecasting is critical to ensure that a business does not exceed demand for a product, or run out of necessary materials in the course of making it. Manufacturing engineers are better able to stay in line with the business’s operational goals by keeping abreast of inventory forecasting. Every aspect of the business depends on the ability of manufacturing to produce at a pace that is commensurate with the demand, and skilled analysts with experience from an online MBA program can ensure that a production pipeline is always operating at optimal capacity.

Forecasting and optimized capacity planning means putting the hot chocolate packets in the pipeline at the end of summer, and freezing ice cream for sandwiches at the end of winter so that they are ready for the first blast of summer. Otherwise, you end up selling the wrong product in the wrong season. Check your forecast early and often, and plan accordingly.

Learn about the USI online MBA program.


Sources:

http://blog.trginternational.com/bid/192827/Production-demand-forecasting-How-to-do-it-right

http://smallbusiness.chron.com/importance-limitations-forecasting-36164.html

http://yourbusiness.azcentral.com/top-10-reasons-sales-forecasting-important-24818.html

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