M.COM SEMESTER – IV (CBCS)

BUSINESS STUDIES (MANAGEMENT)

SUPPLY CHAIN MANAGEMENT LOGISTICS

Q.5 Explain in detail forecasting in SCM
and the need for the same in business.

ANS:

Forecasting is the process of making
predictions based on past and present data. Later these can be compared
(resolved) against what happens.

• ·       
  For example, a company might
  estimate their revenue in the next year, then compare it against the actual
  results. Prediction is a similar, but more general term.
• ·       
  Forecasting might refer to
  specific formal statistical methods employing time series, cross-sectional or
  longitudinal data, or Supply Chain Management and Logistics alternatively to
  less formal judgmental methods or the process of prediction and resolution
  itself.
• ·       
  Usage can differ between
  areas of application: for example, in hydrology the terms “forecast”
  and “forecasting” are sometimes reserved for estimates of values at
  certain specific future times, while the term “prediction” is used
  for more general estimates, such as the number of times floods will occur over
  a long period.
• ·       
  Risk and uncertainty are
  central to forecasting and prediction; it is generally considered good practice
  to indicate the degree of uncertainty attaching to forecasts.
• ·       
  In any case, the data must
  be up to date in order for the forecast to be as accurate as possible. In some
  cases the data used to predict the variable of interest is itself forecast.
• ·       
  Data-driven forecasting
  provides more accurate predictions, but qualitative data also plays a
  significant role in supply chain forecasting and has proven to be just as
  effective.
• ·       
  In many cases, ecommerce
  brands use a combination of both quantitative and qualitative forecasting
  methods to get as close to accurate predictions as possible.
• ·       
  However, qualitative
  forecasting methods come in handy when there is a lack of data. Oftentimes, new
  businesses or innovative products rely on qualitative forecasting methods to
  make predictions. Here are the most common qualitative forecasting methods used
  in ecommerce supply chain forecasting.

1. Market research:

Market research is a best practice for any
business, whether it’s selling a product or even a service. For ecommerce
sales, market research can be used to predict supply and demand, and help
determine whether or not there is strong demand for a product that will support
profit goals. Market research can be executed internally by marketing or sales
experts, or businesses can hire a third-party that specialize in market
research. There are different tactics used, from developing stakeholder
surveys, conducting a thorough competitive analysis, or even interviewing
experts in a specific field or industry.

2. Delphi method:

The Delphi method consists of market
orientation and judgments within a small group of experts or advisors, which is
then sorted, grouped, and analyzed by third-party experts.

The opinions of the experts are gathered
individually to avoid the influence of others’ options, which differs from a
panel discussion or focus group. The gathering of opinions is outsourced to a
third-party, which analyzes the opinions and information shared. Once reviewed
closely, the information is then summarized with an emphasis on different patterns
or trends before handing the findings over to the business to review. This
method has proved effective and dependable for long-term forecasting.

3. Historical analysis:

Historical analysis uses the sales history of
a product having a parallel relationship with a present product to predict
future sales. It can be utilized to predict the market’s response to a new
product or product line. For instance, if you sell vacuums, you would look at
past performance on your highest selling vacuum models. Then, you would compare
whether or not the features for the new vacuum are similar yet offer something
new and improved in terms of settings and options.

Historical data can also be collected by
looking at your competition’s high-selling products and comparing similar
products in your line to determine demand when possible.

4. Panel consensus:

The panel consensus method brings together
members of a business across all levels to establish its forecast. It is an
open process that allows all the participants to express their opinions and
predictions based on what they know.

For example, you
could work with your ecommerce customer service team to identify which products
are being returned most often and why, or work with your sales team to get
insights on what customers are asking for.

 

 

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