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Forecasting importance in manufacturing industry
Forecasting importance is specifically more important in manufacturing industry as the amount invested on raw material procurement becomes dead inventory the moment sales does not happen so forecasting with precision is tedious job which plays crucial role.
For e.g if the raw material is procured at bulk rates then realization of profits increase as the cost of manufacturing remains same across its only the raw material fluctuation which plays all the damage. So having raw material from a source, which is giving at lesser price and procuring them is good decision but if things don’t go as desired with end product then the inventory problems crop up.
The forecasting is a science in today’s world where the markets and consumer patterns are being mapped to arrive at the spike that can happen or the changes of behavior can come across. For e,g a company which is in manufacturing of CASEROLE will have low on demand during summer season so the planning manager has to keep in mind that he just needs to manage optimum inventory.
The manufacturing unit should have decision based on data, existing buying patterns and market behavior, which will ensure that forecasting, helps in increasing the bottom line of any manufacturing unit.
The forecasting in retail industry is also critical as you may stock few of a products but the demand increases and you run short of stocks and customers asking for the same, this ensures that you start buying at higher price and lower your margins to ensure customer is taken care happens. This burns hole in your bottom line
The more difficult is the job as human being a gregarious animal there has been instances where in demand has increased when it was suppose to go down and the vice versa.
Manufacturing unit just cannot increase the production at short notice to meet the sudden rise in demand, hence the role of forecasting and planning manger is critical to ensures that demand and supply chain is balanced properly and the unit is well prepared with raw materials which is optimum level to absorb any kind of shocks that come from market.