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Chapter 3: Forecasting
Strategic vs. Tactical Forecasts
Strategic forecasts use predictions for making decisions related to business strategy. For example, a company would use strategic forecasting to estimate potential demand and competition. Tactical forecasts are short-term and used for daily operations. A retail store might use tactical forecasting to determine the number of staff needed for an upcoming holiday season. If I were planning for a long-term venture, I would use strategic forecasting.
Quantitative vs. Qualitative Forecasting
Quantitative forecasting uses numerical data and statistical methods to predict future occurrences. A company would use it to predict sales for the next quarter based on historical sales data. Qualitative forecasting is subjective and uses opinions and research. A company might use focus group discussions to anticipate market reactions. Personally, if I were anticipating future price of a collectible based on past trends, I would use quantitative forecasting.
Chapter 4: Strategic Capacity Management
Strategic Capacity Management
This refers to the methodologies a company uses to sync company production with its long-term business strategy. For example, a car manufacturing company might invest in a new production line to cater to the anticipated demand for electric vehicles over the next decade. On a personal level, I would use strategic capacity management when deciding on investments.
Decision Trees
Decision trees are a graphical tool to visualize the possible outcomes of decisions. For example, a company might use them to visualize the potential profits against the risks and costs associated with different market reactions to a product launch. I would use a decision tree in weighing the long-term benefits and drawbacks of a job choice.
Capacity Planning in Services vs. Manufacturing
In manufacturing, capacity planning focuses on tangible output, like number of products. A factory might set a target for producing a specific number of units per day. Capacity planning focuses on capability to reach goals. A call center would strategize to have enough representatives to handle the expected call volumes. If I were doing tutoring, my capacity would be determined by the number of students I can teach in a week. If I were crafting jewelry, it would be about the number of pieces I can produce.
Additional Insights
The accuracy of forecasting is what matters. It is about refining predictions, making them more precise over time. Having extra capacity can be a strategic advantage. Also, the value of collaborative forecasting techniques are helpful.
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