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Managers guide to forecasting
ABSTRACTS
The basic premise behind computer-integrated manufacturing (CIM) is that of totally automating and linking all of the functions of the factory and corporate headquarters. By so doing, a manufacturer could: Conceive new products on a computer-aided design (CAD) system that would allow designers to optimize their ideas. Pass the CAD data electronically to a computeraided engineering (CAE) system to verify that the design will do the job intended and can be made economically. Extract from the CAE data the information needed to make the product. The information would be sent to a computer-aided manufacturing (CAM) system. The CAM system would send electronic instructions for making the product to computer-controlled machine tools, robotic assembly stations, and other automated equipment on the shop floor. Coordinate with computerized management systems, such as manufacturing-resource planning, which keeps a running tab on the consumption of parts and materials, and manufacturing-process planning, which helps schedule production for optimum efficiency. With a CIM factory, companies would have the ability to respond instantly to changing market conditions, tailor products for each buyer, cultivate a wider mix of customers, and introduce new products at will. The hang-up in implementation is partly cost, technology, and the shortage of good people, but mostly, it is due to management inertia. This is especially problematic for small companies which also happen to employ the majority of blue collar workers, create the lion's share of new jobs, and generate the most innovations. These companies have to wait until turnkey CIM systems are available. Even a flexible manufacturing system (FMS) can cost $5 million or more. (An FMS consists of machine tools, robots, and other programmable devices under the integrated control of a computer.) In order to invest in CIM technology, management will have to rethink capital investment decisions. Nearly all financial yardsticks ignore the benefits of such intangibles as flexibility, better quality, and shorter
J PROD INNOV MANAG 1986;3:204-217
209
lead times in getting new products to market. These intangibles provide the most concrete reasons for automation.
Managers Guide to Forecasting, David M. Georgoff and Robert G. Murdick, Harvard Business Review (January 1968) pp. 110-120. (WJA)
While In Search of Excellence reported that 3M develops its new products before it even starts to think about forecasting demand, most organizations feel an intense need to incorporate forecasting into their new product development process. When it comes to forecasting, many organizations tend to lock in on "the way we've always done it." They become comfortable with a particular method and continually reuse it regardless of whether it's best suited for the needs of the moment. Georgoff and Murdick have evaluated 20 different forecasting techniques against 15 characteristics. This information is presented in matrix form so that the person interested in determining which techniques might be appropriate for the task at hand can simply sort through the 15 questions and come up with a list of suitable techniques. The information in the matrix includes the strengths and weaknesses of each technique. The 15 criteria are: TIME: 1. Span 2. Urgency 3. Frequency RESOURCE REQUIREMENTS: 4. Mathematical sophistication 5. Computer 6. Financial INPUT: 7. Variability 8. Internal consistency 9. External consistency 10. External stability OUTPUT: 11. Detail 12. Accuracy 13. Capability for reflecting direction changes 14. Capability for detecting direction changes 15. Form
210
J PROD INNOV MANAG 1986;3:204-217
The forecasting methods described in this article are: Judgment methods: Naive extrapolation Jury of executive opinion Delphi technique Market testing Sales-force composite Scenario methods Historical analogy Consumer market survey Industrial market survey Time-series methods: Moving averages Adaptive filtering Time series extrapolation Exponential smoothing Box-Jenkins Time series decomposition Association or causal methods: Correlation methods Leading indicators Regression models Econometric models Input-output models
ABSTRACTS
Power can be used to prevent people from having grievances, by shaping their perceptions, cognitions, and preferences in such a way that they accept their role in the existing order of things, either because (1) they can see or imagine no alternative to it, or (2) because they see it as natural and unchangeable, or (3) because they value it as divinely ordained and beneficial. The secret of unobtrusive power is to bring others to a certain meaning or sense of reality. Meaning is subjective and constructed. There is no one real reality. The devices used to effect unobtrusive power are many. Here are a few:
Institutionalize the existing order in structure and culture. That is, create divisions, job titles, task forces, etc., which embody the principles of the moment. Encourage cultures that accept the status quo.
Establish what scientists call the mobilization of bias. That is, set up the predominant rituals and institutional procedures (rules of the game) that operate consistently to the benefit of certain groups or persons.
The Nature of Unobtrusive Power, Cynthia Hardy, Journal of Management Studies (July 1985) pp. 384-399. (CMC)
This very theoretical and academic article has surprising applications to the new products task. Hardy begins by reviewing the traditional concept of power: Power is that ability, in the face of conflict, to bring about the decision outcomes preferred. If there is no conflict, it is presumed that consensus will prevail, and yield what all want to happen. A newer concept of power is that one may work to alter the beliefs, attitudes, and feelings of persons, causing them to accept the status quo and to avoid becoming part of conflict. Thus, one can use power to overcome opposition when it arises or to help assure that conflict will not come about. The latter is called unobtrusive power. As one researcher put it:
Use language that acts as a catalyst to mobilize support or as a device to cloud issues and quiet opposition. Sometimes, literally, obfuscation by obfuscation.
Use appropriate myths. Myths are fictional narratives which legitimize the past and make vivid certain desirable or undesirable outcomes of events being considered.
Use appropriate ceremonies and rituals. These are physical aspects of symbolism and include such actions as ceremonies of dismissal and replacement, arranging the time, place, and method of meetings.
This article probably requires some translation into management, but the translation should not be difficult.
The basic premise behind computer-integrated manufacturing (CIM) is that of totally automating and linking all of the functions of the factory and corporate headquarters. By so doing, a manufacturer could: Conceive new products on a computer-aided design (CAD) system that would allow designers to optimize their ideas. Pass the CAD data electronically to a computeraided engineering (CAE) system to verify that the design will do the job intended and can be made economically. Extract from the CAE data the information needed to make the product. The information would be sent to a computer-aided manufacturing (CAM) system. The CAM system would send electronic instructions for making the product to computer-controlled machine tools, robotic assembly stations, and other automated equipment on the shop floor. Coordinate with computerized management systems, such as manufacturing-resource planning, which keeps a running tab on the consumption of parts and materials, and manufacturing-process planning, which helps schedule production for optimum efficiency. With a CIM factory, companies would have the ability to respond instantly to changing market conditions, tailor products for each buyer, cultivate a wider mix of customers, and introduce new products at will. The hang-up in implementation is partly cost, technology, and the shortage of good people, but mostly, it is due to management inertia. This is especially problematic for small companies which also happen to employ the majority of blue collar workers, create the lion's share of new jobs, and generate the most innovations. These companies have to wait until turnkey CIM systems are available. Even a flexible manufacturing system (FMS) can cost $5 million or more. (An FMS consists of machine tools, robots, and other programmable devices under the integrated control of a computer.) In order to invest in CIM technology, management will have to rethink capital investment decisions. Nearly all financial yardsticks ignore the benefits of such intangibles as flexibility, better quality, and shorter
J PROD INNOV MANAG 1986;3:204-217
209
lead times in getting new products to market. These intangibles provide the most concrete reasons for automation.
Managers Guide to Forecasting, David M. Georgoff and Robert G. Murdick, Harvard Business Review (January 1968) pp. 110-120. (WJA)
While In Search of Excellence reported that 3M develops its new products before it even starts to think about forecasting demand, most organizations feel an intense need to incorporate forecasting into their new product development process. When it comes to forecasting, many organizations tend to lock in on "the way we've always done it." They become comfortable with a particular method and continually reuse it regardless of whether it's best suited for the needs of the moment. Georgoff and Murdick have evaluated 20 different forecasting techniques against 15 characteristics. This information is presented in matrix form so that the person interested in determining which techniques might be appropriate for the task at hand can simply sort through the 15 questions and come up with a list of suitable techniques. The information in the matrix includes the strengths and weaknesses of each technique. The 15 criteria are: TIME: 1. Span 2. Urgency 3. Frequency RESOURCE REQUIREMENTS: 4. Mathematical sophistication 5. Computer 6. Financial INPUT: 7. Variability 8. Internal consistency 9. External consistency 10. External stability OUTPUT: 11. Detail 12. Accuracy 13. Capability for reflecting direction changes 14. Capability for detecting direction changes 15. Form
210
J PROD INNOV MANAG 1986;3:204-217
The forecasting methods described in this article are: Judgment methods: Naive extrapolation Jury of executive opinion Delphi technique Market testing Sales-force composite Scenario methods Historical analogy Consumer market survey Industrial market survey Time-series methods: Moving averages Adaptive filtering Time series extrapolation Exponential smoothing Box-Jenkins Time series decomposition Association or causal methods: Correlation methods Leading indicators Regression models Econometric models Input-output models
ABSTRACTS
Power can be used to prevent people from having grievances, by shaping their perceptions, cognitions, and preferences in such a way that they accept their role in the existing order of things, either because (1) they can see or imagine no alternative to it, or (2) because they see it as natural and unchangeable, or (3) because they value it as divinely ordained and beneficial. The secret of unobtrusive power is to bring others to a certain meaning or sense of reality. Meaning is subjective and constructed. There is no one real reality. The devices used to effect unobtrusive power are many. Here are a few:
Institutionalize the existing order in structure and culture. That is, create divisions, job titles, task forces, etc., which embody the principles of the moment. Encourage cultures that accept the status quo.
Establish what scientists call the mobilization of bias. That is, set up the predominant rituals and institutional procedures (rules of the game) that operate consistently to the benefit of certain groups or persons.
The Nature of Unobtrusive Power, Cynthia Hardy, Journal of Management Studies (July 1985) pp. 384-399. (CMC)
This very theoretical and academic article has surprising applications to the new products task. Hardy begins by reviewing the traditional concept of power: Power is that ability, in the face of conflict, to bring about the decision outcomes preferred. If there is no conflict, it is presumed that consensus will prevail, and yield what all want to happen. A newer concept of power is that one may work to alter the beliefs, attitudes, and feelings of persons, causing them to accept the status quo and to avoid becoming part of conflict. Thus, one can use power to overcome opposition when it arises or to help assure that conflict will not come about. The latter is called unobtrusive power. As one researcher put it:
Use language that acts as a catalyst to mobilize support or as a device to cloud issues and quiet opposition. Sometimes, literally, obfuscation by obfuscation.
Use appropriate myths. Myths are fictional narratives which legitimize the past and make vivid certain desirable or undesirable outcomes of events being considered.
Use appropriate ceremonies and rituals. These are physical aspects of symbolism and include such actions as ceremonies of dismissal and replacement, arranging the time, place, and method of meetings.
This article probably requires some translation into management, but the translation should not be difficult.