The actual process of controlling the daily activities and operations in a warehouse inclusive of the receiving, shipping, distribution, and pick of goods and services is called warehouse management. Warehouse management can also be referred to as inventory or stock control. In this case, after watching the video and reading the external link provided, I have learned that some various processes and activities are involved in warehouse management.
Some of these processes involved the forecasting of cycle counts at regular times, conducting a forecast on the handling of various materials that are used in the production of goods and services amongst other critical operations. However, the aspect of demand forecasting had been given greater emphasis through the importance that it has towards the effectiveness of organizational operations, planning, and profitability through the various steps and methods that are applied to ensure a successful implementation of warehouse management.
The key aspects that are involved in warehouse management as it has been outlined in the video together with the provisions of the external link are demand forecasting and inventory forecasting which comprises the critical aspects for the determination of what comes in and out of a warehouse. First, demand forecasting has exclusively been described in the video with the lecture. It has simply been said to be the prediction of the future demand for a firm’s product. The quantity of a product with which the consumers are willing and capable of purchasing within different price ranges and at a stipulated time is called demand. Demand stipulates the relationship existing between the quantity expected and the price which is indicated in the demand curve (“Demand Forecasting | Techniques of Demand Forecasting”, 2020).
On the other hand, in the external link that has been provided, inventory forecasting has also been exclusively described. To start with, inventory implies to the various forms of finished goods or material categories that are involved in the process of production within a manufacturing company or a firm. Inventory takes the class of current assets in the balance sheets of companies which plays part in buffering the order and manufacturing fulfillment. Therefore, I have learned that the process which is involved to make orders, store, and use the inventories of a company is called inventory management. The crucial aspects or activities that are involved in inventory management are the raw materials management, management of components and finished products all through to the processing and warehousing of all the items utilized in a firm (Jill, 2020).
There is great importance to the utilization of demand forecasting within an inorganization. In the video link, the lecture helped in gaining insight into the various factors that call for the need for demand forecasting. First, demand forecasting helps in giving an idea to the firm’s management to be able to plan and schedule the production of demanded products in the market. Secondly, it plays a vital role in acquiring the inputs required in the production process. This helps in determining the number of inputs to be needed.
Thirdly, it helps in making advanced provisions of finances. When going into production, the firm will be able to determine the demand and finances required to be used. Additionally, it helps in formulating the pricing strategies based on the provisions of the markets and that of competitors. Finally, there is a greater impact on planning for advertisement strategy. After determining that the demand for a product is lower in the market, then a firm will be able to increase strategies related to advertisement into the media to ensure that the demand is enhanced.
Steps to demand forecasting
The video has outlined clearly that demand forecasting is a process that requires the utilization of various steps to ensure successful attainment of objective and in learning the extent of demand in a company. Five steps have been given priority as drivers towards the forecasting of demand.
Specification of the objective is the first step towards demand forecasting. This means that there is a need to think for what purpose is the demand forecasting being conducted. Some of the objectives could be for the determination of the market share in a firm, to determine the short-term or long-run demand, or even to determine the demand for the products that are being produced by a company.
Secondly, it is to determine the perspective of time. This implies the period within which the demand forecasting is to be focused in terms of a product. This can either be a short or long run. For the short-term case, the period is usually between 1 to 3 years. For this period, the assumption can be that demand will be constant such as the taste and preference of consumers. From the long-term time perspective which is over 3 to more years, there could be a significant change in the demand for products and thus, such factors need to be enhanced (“Demand Forecasting | Techniques of Demand Forecasting”, 2020).
Thirdly, it is choosing the technique and method to be used on-demand forecasting. This is what requirement that a business can utilize in determining the rise and fall of demand. The fourth step that was talked about is collecting and adjusting data to be utilized in demand forecasting. There are various types of data requirements for forecasting, this can either be primary or secondary but it is considering the form of data available in the market. For the case of a new market in the market, primary data will be utilized while if the product has been in existence, secondary data will have to be utilized.
Lastly, it is the estimation and interpretation of results. This is the final step after all the above is done so that we can determine the way forward. The estimation can be in the form of an equation whereby the results are presented to show the quantity of demand and the appropriate forecast that can be made. Statistical interpretation is also appropriate (“Demand Forecasting | Techniques of Demand Forecasting”, 2020).
Techniques to demand forecasting
Two key methods have been proposed in the video that can help in estimating and forecasting the demand. They are the statistical method and the survey method. The first division is the survey method which comprises opinion pol techniques and consumer survey direct interviews. It refers to the technique used for making demand’s short-term forecast. In this case, there are surveys conducted on consumers to determine their future purchase demand. In the case of a consumer survey, there is the use of direct interviewing which utilized three methods which are complete enumeration whereby all the consumers in a market are used for the survey, sample survey which collects a sample from the market to run the survey. And finally, there is the end-use method which helps in the demand forecast of a product’s inputs through a schedule for the future. For the opinion poll, it is usually conducted by those closely related to the consumers such as the sales teams. Expert opinion, Delphi method, and market studies and experiments utilized during the introduction of a new product into the market. On the statistical method, the key components utilized are the trend projection, barometric method, and econometric method. This entails scientific techniques of demand forecasting. Trend projection considers such aspects as sales in the past to predict their status in the future. In the barometric technique, it helps in predicting the indicators in the various business activities that can imply future trends. Finally, there is the econometric method that utilized economic theories to forecast economic variables (“Demand Forecasting | Techniques of Demand Forecasting”, 2020).
This is the final bit from the reading provided which helps in depicting the need for inventory forecasting irrespective of the form of business that a company is in as it helps greatly in ensuring the financial success of the business. A picture of having too much of an inventory on the shelves was created that could lead to a tie-up of cash which could have been diverted into other operations and productive investment operations in a company. Various factors could be used in inventory forecastings such as seasonality which mainly considers past sales, sales velocity which considers the out-of-stock days, as well as the sales trends which helps in showing the steady nature of demand and the potential for it to increase in the future (Jill, 2020).
There is an aspect of seasonal products and their treatment on inventory forecasts. This implies a product selling at different rates at specific times of the year such as during holidays. In the sales and forecast graph, the sale of seasonal products is rising as they fall significantly. Forecasting for the sale of new products is another critical aspect that puts into consideration the new product launches, sales trends in similar brands such as in the example that has been provided relating to Jill’s Jelly Beans and the introduction of orange flavor. This would call for a forecast on its other brands such as lemon and lime to help in implying the future sales for the orange Jelly beans. The aspect of the promotion is also a consideration when conducting inventory forecasting whereby for success, future promotions must be considered and past promotions. In all, costs must be considered as well as the potential of the sales to bring about a return (Jill, 2020).
All through the above analysis, it is evident that the aspect of forecasting is critical in all the operations carried out within a firm starting from the sourcing of raw materials which makes up the inputs to the production, and the sale of the final products. The two concepts of demand and inventory forecasting have been explored whereby in all, there is a greater benefit that can be realized in the success and even profitability of a firm. Therefore, the video and the reading are insightful since as a management student, I will be in a position to identify the main areas the application of forecasting can be enhanced and the items that need to be considered. This is particularly important in the management of warehousing.
Demand Forecasting | Techniques of Demand Forecasting. Youtu.be. (2020). Retrieved 1 November 2020, from https://youtu.be/WXM0GwiILc0.
Jill. (2020). Ultimate Guide to Inventory Forecasting. Inventory-planner.com. Retrieved 1 November 2020, from https://www.inventory-planner.com/post/ultimate-guide-to-inventory-forecasting.
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