Importance of Forecasting in Operations Management


The responsibility of managers is to take good care of the assets of owners and ensures employees do their best to achieve maximum performance and high profits. However, not all businesses can achieve success quickly because of the challenges in the internal or external environments. The internal environment refers to aspects of organizational culture, work policies, and the underlying assumptions of managers regarding an organization. External environments include taxation, competition, politics, and consumer tastes and preferences (Tsay 87). Efficient managers should place their organizations in positions that utilize the available resources and assure investors of a secure future. The process of forecasting the operations of a business is important in promoting the use of sustainable practices. This essay examines the importance of forecasting in operations management and its impacts o various stakeholders.


Forecasting is the practice of using past and present experiences and information to predict and make proper decisions that will help an organization and its employees in the future. Therefore, it is a deliberate action that enables companies to plan and have higher chances of succeeding regardless of the challenges that will face them in the future. Operations management are aspects that control the activities of an organization. Therefore, forecasting in operations management is the practice of predicting the appropriateness of various activities in shaping the future of an organization. Managers have the responsibility of propelling their organizations and ensuring they use appropriate mechanisms to navigate the turbulence of competition, inflation, and other factors that affect the performance of companies.

Types of Forecasts

Economic, technological, and operational demands are the main types of forecasting in businesses. Economic forecasting involves the prediction of business activities regarding issues like competition, inflation, and market forces that affect the production, distribution, and sale of goods and services (Daxböck 275). Most economic factors of operational management have a direct influence on the performance of an organization. Organizations should have appropriate economic forecasting strategies to ensure the changes in the business environment do not have adverse effects on their performance.

Technological forecasting refers to the prediction and use of technology and how this can transform organizations. For instance, a bakery may decide to abandon baking bread and use modern technology to produce other wheat-related products depending on how the consumer tastes and preferences dictate. The bakery managers will decide that the existing technology will not be useful in the future; therefore, they will plan how to get a technology that will produce the expected benefits without affecting other operations of the business. Most technological forecasting operations do not have immediate impacts on the management or employees unless if they are not introduced appropriately.

Operational demand forecasting refers to the use of appropriate evaluation strategies to read the minds of consumers and predict what they may require in the future. Organizations should have robust marketing strategies and marketers who can identify the possibilities of gaps in the future and advise management on the appropriate steps to be taken to fill them (Huiskonen 514). Operational demand forecasting enables businesses to be ahead of their competitors in understanding what consumers want, and the costs involved to offer them the required goods or services. Organizations should always have their ears on the ground and read the minds of consumers to understand what they may require in the future and plan how to provide it in time to avoid stiff competition.

Strategic Importance of Forecasting

Forecasting in operations management is an indispensable aspect of an organization. All stakeholders benefit from successful forecasting because they get high-quality goods or services o time. In addition, it reduces the possibilities of service breakdown and other inconveniences associated with transitioning from a practice to another (Smith, Maull, and Nzone 243). The human resource department benefits from this practice by getting information within a short tie and guiding employees to adjust to the expected challenges for maximum production. Human resource managers should work with other relevant stakeholders like pollsters and activist groups to know what the future holds for their organizations.

The production capacity of an organization is influenced largely by the practices it adopts in managing change and other inevitable aspects. Businesses that do not have strategic forecasting management plans are usually caught unprepared when unexpected events occur. For instance, the economic recession of 2007 affected the productivity of businesses that had no clues that there was a possibility of a financial meltdown before it occurred. Businesses that have appropriate operational forecasting strategies have higher chances of boosting their production and incurring reasonable expenses.

Forecasting in operations in the management of an organization helps the supply chain department to understand the dynamics that affect its operations. It is necessary to explain that most supply chain managers understand the need to have prior knowledge is and the expected changes in this department (Kulkarni, Apte, and Evangelopoulos 974). They work with suppliers and consumer protection lobby groups to understand the implications of political, social, and economic changes in the distribution of goods and services they produce.

Quantitative Forecasting

This is the prediction of future activities of a business using various models that help managers and other stakeholders to identify issues that require improvement to boost sales and maintain existing markets. Quantitative forecasting may involve the study of consumer trends, tastes, and preferences. Consumers dictate the operations of businesses by liking or abandoning their services or goods. Businesses must predict the expected changes in consumer behavior and align their activities to maximize the new development.

The main advantage of this forecasting strategy I that it enables businesses to stay relevant by producing goods or services that are required in the market. For instance, today’s generations prefer Android phones that have various applications and user-friendly interfaces. Companies like Samsung, Microsoft, and Google, understand how technology affects consumer tastes and preferences. They conduct market surveys to predict what consumer tastes and preferences will be in the future. Therefore, they have higher chances of producing goods and services that will fetch good prices and attract most customers.

However, it is not advisable to rely on consumer tastes and preferences to determine whether a product may fetch good prices in the future or struggles to remain relevant in the markets. Consumer traits are fragile, and they can change anytime when nobody expected this to happen. Therefore, companies may be forced to spend unnecessarily thinking that they have made proper predictions


Forecasting in operations management is an inevitable aspect of businesses that wish to remain relevant and control significant markets. Investors should study markets carefully and work with the human resource department to identify the technological, operational, and market forces that shape the future of their investments. It is wise to consider various approaches when managing forecasting operations to ensure all stakeholders are consulted and involved in making critical decisions.

Works Cited

Daxböck, Christian, “Supply Chain Management–Sales & Operations Planning in the Fast-Moving-Consume Goods-Industry.” Unternehmenssteuerung in der produzierenden Industries. Springer Fachmedien Wiesbaden, 2014. 271-285. Print.

Huiskonen, Janne. “Service parts management: demand forecasting and inventory control.” Production Planning & Control 25.6 (2014): 513-514.

Kulkarni, Shailesh S., Uday M. Apte, and Nicholas E. Evangelopoulos. “The Use of Latent Semantic Analysis in Operations Management Research.”Decision Sciences 45.5 (2014): 971-994.

Smith, Laura, Roger Maull, and Irene Nzone. “Servitization and operations.” Operations & Production Management 34.2 (2014): 242-269.

Tsay, Andy A. “Foundations and Trends in Technology, Information and Operations Management.” Foundations and Trends in Technology, Information and Operations Management 7.1-2 (2014): 1-160.

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