English to Portuguese Bus/Financial Finance (general) inventory

Why Forecasting?

The question of whether forecasts are necessary crops up from time to time. The inescapable conclusion is that no matter what type of business you are in, or what function you perform, there is a need for some kind of future estimate upon which to build a plan.

These plans are applied to many different areas of the enterprise, which have different needs and objectives.


• Marketing people need forecasts to determine which new products or services to introduce or discontinue; which markets to enter or exit; and which products to promote
• Salespeople use forecasts to make sales plans, since sales quotas are generally based on estimates of future sales
• Managers in the supply chain use forecasts to make production, procurement, and logistical plans
• Finance professionals use forecasts to make financial plans. They also use them to report to Wall Street about their earnings expectations



It is difficult to quantify the benefits of forecasting; however, in the supply chain, there are certain components that can be quantified, showing the benefits of forecasting. One way to measure the benefits of forecasting is to see how much would have been lost if the forecast was not accurate. Another way to measure them is how much would have been gained (or saved) with improved forecasts.

There are some caveats: errors can result from either under-forecasting or over-forecasting. In under-forecasting, the losses arise from the potential loss of regular and companion products, though increases in production and shipment costs can make up for the shortfalls. In the case of over-forecasting, the losses come from discounts that must be offered to dispose of excess inventory. In addition, obsolescence, transshipments, warehouse costs, and the costs of holding excess inventory can also contribute to these losses. This includes the transshipment of products from one distribution center to another to eliminate excess inventory.