Business Forecasting
business forecasting
Six Sigma and Business Forecasting
They will do so because although the use of Six Sigma concepts in business forecasting is quite prevalent, it is one of the many aspects of Six Sigma that still remain under-publicized.
Lack of publicity, however, has not affected the use of Six Sigma concepts in business forecasting, easily evident from the increasing number of businesses that are utilizing the concepts for business forecasting and allied activities.
How Six Sigma Aids Business Forecasting
Just a few decades back, business forecasting was considered the domain of senior and top management officials who usually relied on their experience, viewpoints, perceptions, and gut feelings for charting out the future prospects of the business. These techniques did not have any scientific basis, yet amazingly they proved quite effective, most probably because at that time monopolistic tendencies were prevalent, allowing businesses to get away even with the worst of business forecasting decisions.
However, the business environment has changed dramatically over the years, so much so that now no business can afford to base their business forecasting decisions solely on gut feelings and personal opinions. With growing customer awareness and increasing competition, businesses are now literally being forced to deploy highly effective management systems such as 6 Sigma. This process helps in business forecasting by making available the most advanced scientific tools and techniques that rely mostly on facts and figures.
By following a data driven approach, Six Sigma automatically reduces the probability of erroneous business forecasting decisions that might have been a possibility, if such decisions were based on conventional techniques.
Importance of Six Sigma in Business Forecasting
In today’s globalized world, business forecasting has become one of the most important management functions. If business forecasting is not carried out properly, it can easily result in a complex situation where a business might find itself inundated with unsold products or services in the event of a market slump and vice versa.
In such situations, businesses will either have to bear huge losses or make their disappointments felt over missed business opportunities, both of which are detrimental for the future prospects of the business. However, by deploying Six Sigma concepts and methodologies, businesses can easily prevent such negative developments.
It helps because it enables businesses to quantify customer needs and requirements, something that makes way for accurate business forecasts. Based on such accurate forecasts, the business can then easily alter its production plans in line with the potential future demand.
This process is basically a discipline in the guise of quality management system and as such it can be successfully deployed in each and every business domain. This implies that 6 Sigma’s use in business forecasting is not an exception. For deploying Six Sigma concepts in other similar domains, businesses just need to use their imagination and creativity. The rest will follow automatically.
About the Author
Tony Jacowski is a quality analyst for The MBA Journal. Aveta Solution’s Six Sigma Online offers online six sigma training and certification classes for lean six sigma, black belts, green belts, and yellow belts.
What are the differences of financial forecasting when comparing small and large businesses?
I just wanted to know for my business assignment, the advantages and disadvantages of financial management for larger business and small businesses
The mechanics are pretty much the same.
Financial management is key in any size business.
Percentages are a common denominater.
Those will be different in a small business where the owner may produce a portiion of income, which lowers the selling expense.
As for forcasting, a large National or International corporation has to consider a broad customer base.
A small business, with one location in a city must consider the local customer base, which sometimes is a limited area of the city.
This case involves keeping the regular customers and reaching out to newcomers to the neighborhood.
Death of customers must be replaced by new customers.
Consider TV ads and Yellow pages. These medias reach hundreds of miles from a small business location. They cost a fortune and reach customers that will NEVER be seen.
Advertising is better spent and more cost effective in reaching the areas of customer base.
Expanding the business involves a whole new approach in determining a new location. Demographics and location are important considerations, as well as growth areas within the city. This is quite involved.
It’s very important to know from where, the area, customers are coming from.
Today, with the cost of travel, customers will not shop too far from their homes, even for some savings. Malls have sprung up nearby most subdivisions and those customers will pay a bit more to conserve travel time and gas.
Consider this.
Walmart.
They may know that a Super Mart is drawing customers from an area some distance form the store.
AHA! We should open a store in that area. And they do.
BUT! What happens?
The original store has LOST customers from that area.
Yes, they still sell to those customers, but at a higher cost for a new operation.
So, they must re-plan the original store to allow for a loss of custiomers. Additional growth in the area may come, and they have to rebuild their customer base.
Same with any large department store that expands into new malls.
Too much to further discuss here.
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