Question

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Forecasting is instrumental in the insurance industry. From forecasting potential risks in the economy, to forecasting customer needs to ensure proper staffing, we must prepare for the unexpected. When forecasting we utilize quantitative methods since we have past data we can look back on (Anderson, Sweeney, Williams, Camm, Cochran, Fry, & Ohlmann, 2016). In my role, the biggest use of forecasting comes in our staffing levels. We staff our claims center to ensure we have enough representatives on hand to help customers when needed. We then go even deeper and use forecasting to develop schedules for associates to ensure we have reps available to answer phones while also working on new tasks.

Forecasting can improve organizational processes by learning from the past. An example would be how many pies a baker needs to make. If they sell historically five pies a day then they should stock accordingly to avoid waste. However, if it is thanksgiving time, they may need to produce more for the increased demand, so by using historical data and forecasting, they can determine how many more baking assistants would be needed along with how many pies to make. Forecasting can also be used to determine store hours for a business. If their main job is selling goods for families they may need to stay open later, but if they market to contractors they would need to open earlier than normal business hours to be available.

Answer 1

Forecasting is the process of making predictions of the future based on past and present data and most commonly by analysis of trends. A commonplace example might be estimation of some variable of interest at some specified future date.

In light of current situation of Covid 19 every country is forecasting the likely number of increase in patients and recovered persons in the coming few weeks. These countries are also forecasting the effect of lockdown in preventing the spread of pandemic.

Forecasting has both advantages and disadvantages:

Advantages:

• It helps in gaining valuable insights.By comparing the past and real time data future demand can be predicted. Fluctuations in demand can be figured out and accordingly plans and strategies can be formulated. For example A contact centre by using forecasting can predict in number advance the number of employees required to handle the workload.In this way smooth flow of the work can be assured.
• It helps in learning from past mistakes and taking proper decisions. It’s common to review where and why things didn’t happen the way you predicted. Your forecasts should eventually improve. But more than that, you’ll get into the habit of reflecting upon past performance as a whole. And self-reflection can be a powerful driver of company growth.A bakery can forecast on the basis of past the sake of its products and accordingly produce, thus avoiding wastage of resources.
• It helps in decreasing costs and increasing efficiency. You can forecast the demand of customers, what they want and when they want. Accordingly you can employ workers and also save costs by holding excess inventory. Forecasting the store hours help a great deal. If you are opening it for families then late night workers have to be employed and if for wholesalers then early hours employees are required. Accordingly hours and wages can be predetermined thus saving excess costs.

Disadvantages:

• Forecasts are not 100% accurate. There are many factors which affect demand thus making the process volatile and error prone. An emergency can increase or decrease the demand of a particular product, thus making forecasts wrong. Recently the use of sanitizers and masks have increased due to pandemic which nobody predicted resulting in their shortage.
• It can be time-consuming and involves a lot of resource-intensive.Forecasting data gathering, data organizing, and coordination. Companies typically employ a team of demand planners who are responsible for coming up with the forecast. It requires lot of expertise, costly data management techniques to make accurate and reliable forecasts. It is a time consuming process.
• It is a costly process.investing in advanced software, high-quality talent and solid forecasting processes requires large amount of funds.This may raise the final cost of production.

To conclude Forecasting is of immense importance to manage and use the resources economically. However, it had certain shortcomings, which if handled properly can make Forecasting a profitable tool.