Management Consulting/Marketing manage ment


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Traditional Forecasting
Many organizations seek to mitigate some of the traditional budgeting problems noted above by
implementing some form of forecasting. This allows managers to update budgeted numbers with actual
results for the periods that have already occurred. The forecasts are used to predict what will happen in
the future, often seeking to confirm whether predetermined annual targets will still be met.
While financial managers think of forecasting in terms of periodic forecasts, operating managers are
constantly adjusting plans, including sales estimates, which are converted to operating plans for
production and inventory control levels. Most of these planning efforts are conducted in numerous
discrete systems supporting different functional areas. A great deal of effort is required to integrate and
reconcile these different views of the future.
Financial forecasts are performed on a preset schedule, typically quarterly or monthly.
According to David Axson, author of "Best Practices in Planning and Management Reporting" 4. Axson
explains that these process cycle times are extended due to:
 The difficulty in getting timely information;
 The high level of details required taking significant time to forecast each item; and
 The fact that much of this data is developed in a series of disconnected spreadsheets making
integration a time-consuming process.
Many companies use a purely financial process that is disconnected from its specific business drivers-a
mere financial accumulation of trends. These companies often determine their monthly forecasts by
subtracting the actual results to date from their annual targets and then dividing the remaining gap by the
months remaining. They then view the monthly result to see if it is even possible to attain, All their
forecasting work focuses on achieving the predefined annual targets, even if the underlying assumptions
that went into creating those targets are now Incorrect.
The level of detail used often mirrors the annual plan. Some planners forecast at the same level of detail
that is used for actual reporting, This can result in tremendous efforts in calculating variances and the
related explanation process.
These misconceptions often turn traditional forecasting into merely a different pc version of the
problems with traditional budgeting. Let's examine why.
For many organizations, forecasting is a mechanical process that adjusts future run rates upward or
downward as necessary so that the predetermined annual targets are still met.
They ignore the fact that targets were set based on various assumptions. What happens when the annual
targets are held but their underlying basis proves incorrect? The great quality guru W. Edwards Deming
noted that "if you pay people to hit targets, they often will, even if it destroys your company.

•   3. „Expect the Unexpected.“David Axson
•   4. Forecasting a critical business process in turbulent times.
•   5. What is a forecast? Forward Looking Fact-based Flexible Focused on Risks & Opportunities
•   6. „The end result ... is not an accurate picture of tomorrow, but better decisions about the future.“Peter Schwartz, The Art of the Long View
•   7. Good forecasting practices create value Career Perform n ance Reputatio
•   8. The traditional approach... J F M A M J J A S O N D
•   9. The traditional template
•   10. Static forecasts do not provide the necessary visibility in turbulent times.
•   11. It shows...
•   12. Rolling Forecasts. An effective approach.© 2009 IBM Corporation
•   13. What is a Rolling forecast J F M A M J J A S O N D J F M A M J Q1 Forecast Traditional Q2 forecast Q3 Q1 Forecast Rolling forecast
•   14. Why are rolling forecasts attractive? Increased visibility Consistent time horizon Less reliance on budget Solid baseline for new plans
•   15. Rolling Forecasts speed up the budgeting process Source: The Hackett Group, 2008
•   16. Not only time is saved. Satisfaction increases. Source: The Hackett Group, 2008
•   17. Some elements of a successful forecast Time Horizon & Process Update Frequency Management Agile Models
•   18. Time Horizon & Process Update Frequency Management Agile Models
•   19. Rolling Forecast = 12 month quartely? No. It depends on your business!
•   20. Match the time horizon to the rhythm of your business Short cycles Long cycles Industry Consumer electronics Oil exploration Retailing Pharma development Investment banking Infrastructure investment Plant construction Function Advertising Cash flow Infrastructure investment Overtime Research & development
•   21. „Best practice companies move towards more frequent & event-driven updates.“
•   22. Time Horizon & Process Update Frequency Management Agile Models
•   23. Remember this template?
•   24. „Simplicity is the ultimate sophistication.“Leonardo da Vinci
•   25. Less is more! Simplify your models
•   26. Utilize drivers – the language of business Opportunities Pipeline Number of employees VS. Customer Satisfaction 634172 – Revenue (New Accts) 665891 – Office Supplies (Paper) 665892 – Office Supplies (Pens) 677199 – Gifts, Misc.
•   27. Revenue?
•   28. Time Horizon & Process Update Frequency Management Agile Models
•   29. Process management is critical Wow...there are a lot of moving parts! We need to make a critical decision quickly!
•   30. SAP HR DW Update Distribute Aggregate What-if & Models Models data Optimize New Load Collect Report & version Actuals Data Analyze
•   31. Management Decision Meetings Making!
•   32. Critical elements of the process Aim for repeatability Measure the quality Set strict goals
•   33. And measure & monitor your process Forecast Accuracy Cycle Time Confidence Levels
•   34. Summary: Some elements of a successful forecast Time Horizon & Process Update Frequency Management Agile Models
•   35. Demo goes here
•   36. Rolling Forecasts – a silver bullet? No one-size-fits-all approach Agile models & process required Technology as enabler Forecast culture required
•   37. Next Steps Analyze your processes Download our white papers & blueprints Join the Cognos Innovation Center Web: Twitter: @ibmcognosicemea
•   38. Session Summary The current business environment requires solid forecasting practices that the traditional approaches do not provide Rolling forecasts provide a proven approach for gaining better business insight in today’s volatile business climate IBM provides best practices and solutions for implementing a better forecasting approach
1. first as David mentioned you need exactly to define your problem: how to take the standard time per 1 sample. In our case if you have more samples you can obtain a standard time per group and divide it # of samples in that respective group (doesn't matter if you don't have a constant number of samples).

2. In order to obtain that standard time you need to:
a. break into small tasks the main activity;
b. take the time with a stopwatch of each small task (this is called observed time)
c. the stopwatch time obtained has some variation due to worker experience (beginner - medium - advanced) & frequency of the small task (how many times this small task was repeated inside the main activity) and you need to take into consideration like this: Observed time * worker experience rating * frequency = Normal time (this is called)
d. ILO (International Labor Organization) has put some allowances in every type of industry for personal needs/fatigue etc. and you need to take it into consideration like this: Observed time * worker experience rating * frequency * ILO allowences = Standard Time = Cycle Time.
e. This Cycle Time that you obtained should be the same of each sample you are producing, and would be changed only if you modify the process (meaning eliminate/add small tasks inside the main activity)

What I've mentioned above are the main principles in getting that Cycle Time, but the topic is much more complex cause at a certain point in your process you can have that so called Normal Time - fixed or variable (if the same main activity may contain one or more variable small tasks).  

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Leo Lingham


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18 years working managerial experience covering business planning, strategic planning, corporate planning, management service, organization development, marketing, sales management etc


24 years in management consulting which includes business planning, strategic planning, marketing , product management,
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