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Organization Accomplishment and Inventory Control

A forecast is "an estimate of the level of demand for a product or for several products for some period of time in the future" (Biegel, 1989, 71). In the case of sales forecasting, the demand projected is that of a firm's customers for the products that the firm produces or markets.

To be meaningful for inventory management, forecasts must project demand in terms of measurable units of a product. There are a number of procedures by which forecasts may be developed. Some, such as subjective opinion forecasts, are not suitable for use with contemporary computer applications. A somewhat more sophisticated forecasting procedure which may be used with computer applications is the indexbased forecast. Unfortunately, these forecasts are "as good or as bad as the index that serves as its foundation and the degree of correlation between the actual demand and the forecast based on the index" (Biegel, 1989,p. 147).

The best forecasts are those developed through the application of statistical procedures. Among the major statistical forecasting procedures are the following (Biegel,1989):

1. Trend line projections, which are developed through the use of regression equations.

2. Cyclic demand projections, which consider random variations, and which require the use of multiple regression equations.

3. Curvilinear regression projections, which consider multiple relationships among many variables.

4. Exponentially weighted moving average projections, which are valid only for shortterm projections.

Inventories form "a buffer zone between production or procurement on the one side and sales or usage on the other" (Chambers, 1989, p. 28). Thus, "the effectiveness of any inventory management program depends largely on an ability to make some sort of reasonably accurate forecast of sales or usage" (Chambers, 1989, p. 29). It is to be anticipated that forecasts will often be in error. This fact does not mean that forecasts shoul...

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Organization Accomplishment and Inventory Control. (1969, December 31). In LotsofEssays.com. Retrieved 22:34, October 31, 2014, from http://www.collegetermpapers.com/viewpaper/1303551759.html
 
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