Question

QUESTION 2 Manager in a shoe factory needs a forecast for 5 years ahead. What is expected that will happen with accuracy of the forecast in each of these 5 years (will accuracy decrease, increase or be the same for each year)? Explain why this happens. ттт Arial 3 [12pt) Path:p Words:0

Answer 1

From statement in given problem, Manager needs forecast for next 5 years. but forecasting calculations done in current period for next five years will decrease the forecast accuracy.

It is evident in demand forecasting that with increase in lags, forecast level, trend becomes difficult to predict and anticipation of foe next five period leads to wrong estimations. With these estimations for long periods, forecast values tends to deviate from actual values and accuracy will drop over the period.

Smaller the lag, better the forecast accuracy. In case of shoe factory, even customer preference and current trend of product also makes big impact. If forecasting done with consideration of current trend and past level of orders, and there may be significant shift in choices or trend in near future, forecasted figures will go off drastically and in turn, forecast accuracy as well.

Not only internal factors but external factors also have great influence on forecast and in political unstable condition, there can be chances of major policy decisions in short period which subsequently affects customer demand for product or product mix may get changed due to the same.

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