On the other hand, assumptions start from the forecasts like profit margins, cash flows, expenses, material turnover, etc. They are used for financial planning, risk assessment, and business expansion. Roles of Forecasting in Supply Chain Managementįorecasting plays three major roles in Supply Chain Management.įorecasting is fundamental for Strategic Business Planning. They provide insights into future outcomes. On the other hand, the qualitative techniques rely upon the knowledge of highly experienced people. Highly dependent on mathematical calculations, such as: An example of a quantitative one is based on a historical data like the volume of sales last year, while a qualitative tool can be the opinion of experts about the development of a new line of products.Īre based on models of mathematics and in nature are mostly objective. There are basically two types of tools, quantitative forecast, and qualitative forecast. The erratic pattern shows a random behavior and is composed of unexpected non-repeating events.The cyclical is similar to the seasonal with fluctuation of more than 2 years and is generally due to economic and political factors.The seasonal pattern occurs when a series is influenced by seasonal factors and is predictable, generally throughout a year.The trending follows a continuous upward or downward pattern and is applicable for the long term.Medium term, from a few months to a few yearsĭepending on the demand pattern, it can be classified as trending, seasonal, cyclical, or erratic.Short term, going from a few days to a few months.Periods can be classified in the following categories: ![]() A Material Forecast to ensure all the resources meet customer demand in time and quantityįorecast, it is necessary to determine the involved period of time.A Financial Forecast for profit and loss statements, balance sheets and other cash-flow forecasts. ![]()
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