Organizations use forecasting methods of production and operations management to implement production strategies. Forecasting involves using several different methods of estimating to determine possible future outcomes for the business. Planning for these possible outcomes is the job of operations management. Additionally, operations management involves the managing of the processes required to manufacture and distribute products. Important aspects of operations management include creating, developing, producing and distributing products for the organization.
Advantages of Forecasting
An organization uses a variety of forecasting methods to assess possible outcomes for the company. The methods used by an individual organization will depend on the data available and the industry in which the organization operates. The primary advantage of forecasting is that it provides the business with valuable information that the business can use to make decisions about the future of the organization. In many cases forecasting uses qualitative data that depends on the judgment of experts.
Disadvantages of Forecasting
It is not possible to accurately forecast the future. Because of the qualitative nature of forecasting, a business can come up with different scenarios depending upon the interpretation of the data. For this reason, organizations should never rely 100 percent on any forecasting method. However, an organization can effectively use forecasting with other tools of analysis to give the organization the best possible information about the future. Making a decision on a bad forecast can result in financial ruin for the organization, so an organization should never base decisions solely on a forecast.
Advantages of Operations Management
Operations management can help an organization implement strategic objectives, strategies, processes, planning and controlling. One of the primary focuses of operations management is to effectively manage the resources of an organization so that the organization can maximize the potential of the products or services produced or offered by the company. Depending on the organization, operations management can include managing human resources, materials, information, production, inventory, transportation, logistics, purchasing and procurement.
Disadvantages of Operations Management
Operations management depends on many different components within the organization working together to achieve success. Even if operations management implements an effective plan, if operations management does not carry out the plan properly, the plan will most likely fail. Within an organization, mistakes often occur during the chain of events from manufacturing to sale. Therefore, operations management requires the coordination of operation functions, marketing, finance, accounting, engineering, information systems and human resources to have success within the organization. This poses the primary disadvantage of operations management because if an organization's individual components do not work well together, operations management will have limited success within the organization.
- Ekonomska Fakulteta: Exercises 3: Demand Forecasting
- "Future Ready": Steve Morlidge and Steve Player; 2010
- "Business Forecasting"; John E. Hanke and Dean Wichern; 2008
- Operations Management: Designing and Managing Business Operations