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Impact Operational Forecasting Can Have on Organizations

Operations Management

Rasmussen College

Impact Operational Forecasting Can Have on Organizations

The impact of operational forecasting on an organization manifests itself twofold; through advantages and disadvantages. Managers and operatives of organizations do not neglect forecasting in their plans because many a time the advantages of the process outweigh the disadvantages (Starr & Gupta, 2017). Advantages of forecasting include: establishing a new business; accurate estimation of financial needs; understanding market demand and supply patterns; helping management to make informed financial decisions; improves the quality of management; encourages cooperation and coordination; and overall success in business.

For a newly established business that is less than six months old, forecasting is important because it helps the management to plan expenditure of initial capital outlay. Knowledge on how to plough back profits into a business is important since it helps a business to grow and develop and such is given by forecasting. Accurate estimation of financial needs is dependent on overall industry forecasts (Jain & Malehorn, 2005). For example, if a business is in the banking industry, the industry forecast can be depended on for understanding things such as the present lending rate, the lending rate, market capitalization, and a host of other invaluable information. Understanding market demand and supply patterns is important; forecasting helps business men and women to predict the number of prospective customers (target market) that are likely to be attracted to a certain product.

In summary, forecasting has proven useful because it helps management to make informed financial decisions and overall improves the quality of management. Encourages cooperation and coordination is achieved by the need of all workers and managers to come up with figures that suggest what the nature of the product, marketing methods, new locations, and pricing. In the end, overall success in business is realized.

References

Jain, C. & Malehorn, J. (2005). Practical guide to business forecasting. Flushing, N.Y: Graceway Pub. Co.

Starr, M. & Gupta, S. (2017). The Routledge companion to production and operations management. New York: Routledge.