PROGRESS IN THE ADAPTIVE FORECAST MANAGEMENT OF THE ECONOMIC ORGANIZATIONS. Marin ANDREICA 1 Mădălina Ecaterina POPESCU 2 Dragoş MICU 3

Transcription

1 PROGRESS IN THE ADAPTIVE FORECAST MANAGEMENT OF THE ECONOMIC ORGANIZATIONS Marin ANDREICA 1 Mădăina Ecaterina POPESCU 2 Dragoş MICU 3 ABSTRACT In times of economic instabiity a cautious and adaptive forecast management is greaty needed. There is the risk of consuming the resources in order to achieve specific obectives that have no market and, impicit, the risk of bankruptcy. Practicay, in any given time the decision makers need to have aternative evoution strategies for different evoution hypothesis of the business environment. The authors come to meet these by deveoping an interactive system of assisting adaptive forecast management for economic organizations. KEYWORDS: forecast, adaptive forecast management, degree of inertia, partiay stabe structure, change management, fexibe optimization JEL CLASSIFICATION: C53, C61 1. INTRODUCTION In the context of perpetuating the states of economic instabiity there is an ever growing need to anayse the stabiity of forecasts (productions programs, pans) that are impemented based on the current activity. The answers to the questions: are the actua and the future obectives stabe? If not, are they adaptabe to the new requirements of the economic environment? What is the size of the changes: tota or partia? What is the cost and the frequency of their adaptation? If the change is tota, does the organizatoric and manageria structures need to be changed? It is known that any forecast sets for a time horizon: what needs to be made (obectives), with what it wi be made (materias), when it wi be made (execution dates) and with what costs it wi be made. Practicay, sma and medium horizon forecasts harmonize the obectives with the resources (Micu, D., Lefter, C., 2011). What are the possibe disturbance factors that trigger the activity of adapting the forecasts? Firsty there are economic factors: the change of the market s requirements, the change of the products and materias prices, the abiity to buy the necessary suppies, the 1 The Bucharest University of Economic Studies, Romania, marinandreica@gmai.com 2 The Bucharest University of Economic Studies, Romania, madaina.andreica@gmai.com 3 The Bucharest University of Economic Studies, Romania, micuvdragos@gmai.com 378

2 emergence of better performing competitors, etc., socia factors such as: requests for saary increases, the difficuty of stabiizing skied human resources, the emergence of armed conficts that invove some empoyees, epidemics, egisative framework: fisca changes, environmenta aw requirements regarding poution standards, abour egisation etc. When do the forecasts need to be adapted to the new conditions? As soon as a new disturbance generates activity interruption or when the costs of continuing the activity are very high and affect the enterprise financia equiibrium or at the end of a subdivision of the forecast horizon (month, trimester) or at the deivery of contracted orders for which there exists the prospect of cashing them. Practicay, the adaptabiity process needs to be a continuous one. The cost of adaptation is much ower if the necessary obectives change measures are provided in advance and the materia base aso before the moment in which achieving the initia obectives cannot go on. A of these assume impementing an adaptive system of forecast management. This wi foow in rea time the adaptation of the obectives to the new requirements by substituting unseabe products with other ones that require simiar materias with the ones provided in the materia base, respectivey substituting deficient materia resources with others in conditions of quaity at east identica to the initia ones but with a more efficient price or/and with a reduced unit consumption. It is possibe that, in order to reduce specific costs reating to fabrication, the company may need to be refurbished. A of these actions wi be refected in the manageria performance pan and especiay in the price / benefit ratio pan. 2. FORECAST STABILITY ANALYSIS IN THE CONTEXT OF ECONOMIC INSTABILITY The issue of stabiity anaysis of the deveoped forecasts has been addressed in iterature by a reativey ow number of speciaists among which we woud ike to mention Andreica s works (1988, 2011). Most have focused their concerns for the nationa economy branches, or for ong term future pans. These were reated mainy to the panned obectives without ooking at the genera context of possibe changes in the firm s management. The economic practice of recent years demonstrates that a arge number of enterprises are required in order to survive to make profound changes in their organization as we as in their management. That is why, we wi address the issue of forecast stabiity for a given time whie maintaining the current organizationa and manageria system as we as the case in which the concordance between the organizationa structure, strategy, organizationa cuture, procedura organization and increasing the renewa capacity of the organization. Any anaysis regarding forecast stabiity is made through the prism of their possibiity to adapt to new conditions. It is known that, forecasts are made with one or more years before their impementation, reason for recognizing the presence of many factors, parameters, variabes whose evoution for the given timeframe cannot be accuratey captured. Furthermore, the speed with which they change during the operation time can prevent achieving the expected obectives. However, in practice, any forecast becomes inert in reation to the change of inputs in certain imits, and that is why they need a certain degree of mobiity, fexibiity (Carnot et a., 2005). 379

3 In agricuture this mobiity is provided even by their preparation method, because the forecast s obectives (even the annua ones) depend argey on natura factors. In the case of forecasts the same thing doesn`t happen because mobiity gains a different tint. It is generated by the dynamic and the frequency of the previous enounced factor s changes, which forces us, most of the times, to update the forecasts. But particuary, we are interested in the aowed frequency for which the obectives and the forecast structure can be changed without affecting the possibiity of their achievement. Their adustment invoves changes in the forecasted obectives. But this adustment can be fu or partia (oca). Thus, adusting the forecasts is a system s reaction (economic organization) to the obective changes and the random changes of the input factors and/or the ambiance. In the speciaized iterature even the opposite of the adaptation concept is reveaed: their inertia that, obviousy, reduces the possibe speed change. It foows that, when the adustment of forecasted obectives wi be oca, some of them wi remain unchanged, representing the inertia part of the forecast. What are the possibiities of partia adustment of forecasts? The most frequent ones are: adapting production, resources, coefficients of unitary income and expenses and manufacturing technoogies. For each one of them, it is possibe to organize the resources or product substitution, or to change the voume characteristics (production, resources etc.) if possibe. Thus, for now, we wi anayse the case in which the enterprises (that operates based on aready impemented forecast) are forced under the business deveopment pressure to adapt their obectives to the new requirements of the market, respectivey the possibiities reating to suppying resources. We wi make this anaysis based on the structure of an optimizing mode for obectives with resources. In which: x = is the quantity that is to be made of the product in the technoogica version ; r 1 = the specific consumptions needed to make product from resource i in the technoogica version ; r 2 = the coefficients of the structura correations between obective d 2 i generated. We wi note to make product ; and the products d 1 the consumption from resource i in the technoogica version in order d1 a1 x. Reporting this consumption to the unit of time, we wi obtain the speed of manufacturing reease (its equivaent x ) and the rate of resource consumption. Changing some of the conditions of making the forecast may generate new changes in the production reease intensity, resource consumption and the coefficients of these consumptions, 380

4 refected by the speed variation (acceeration) and expressed through these derivatives dd 1 dt, dr 1 dt and dx1 dt. Because cacuating derivatives is pretty difficut, we wi use first order finite differences: d 1 = the increase of using resource i as a resut of manufacturing product in version ; r 1 = the increase of specific consumption of resource i in order to manufacture product in version ; x = the increase in manufacturing of product in version. Because the variation in a timeframe of the consumption of resources variation of the factors that generates it, we have: d 1 r1 x r1 x d 1 depends on the Each one of these variations is upper imited, reason for which we wi note these imits as such: d 1, r 1, x. By substituting the maximum imits in the above reationship we might have an inequaity. If d 1 is bigger than the right side of the above equation (in which the maximum variation imits have been entered), then we wi rewrite the equation ike this: d 1 r 1 x r 1 x In this case, the sizes of the upper variation imits of the 2 factors wi restrict the possibiity to adapt the pan. Furthermore, if d 1 is smaer than the right part (in the above conditions), then he wi imit the pan s adaptabiity possibiities. There are situations in which a factor s variation is nu. In such cases, the adaptation possibiities shrink to one of the maximum variation imits of the 2 terms. In practice, knowing d 1 one of the 2 factors is estabished at its maxima eve and the other one is cacuated accordingy. Usuay, these cases are rare when resources consumption is anaysed for a singe product. Practicay the resource is distributed to more products that are made using various technoogies: d 1i d1 381

5 In this case, partia adaptation of resource i wi be imited by the maximum eves d 1 : d 1i d 1 Noting with V 0 the set of production technoogies reated to the optima pan and with O 0 the set of forecasted obectives (products), then the imit in which the forecasted resources can be adapted can be achieved, is given by the beow formua: d 0 1i J0 L0 d 1 0 This size ( d 1i ) depends argey on the possibiity to adapt the expected obectives. Idea woud be if this was bigger than the ones caused by deivery deviations of resource i from the 0 contracted eve ( d 1 i ) : d 1i d1 i We woud ike to highight the fact that the possibiities to intervene on this factor can be determined if interna resources consumption normative exist. In some cases, founding obectives can be done on maximum consumption eves that are provided in reguations faciitating the possibiity of a future forecast adustment. Obviousy, this procedure wi give much more stabiity to the seected version but it wi ead to waste of resources owering the executants interest in high capitaization of avaiabe resources. 3. FORECAST ADAPTABILITY ANAYSIS Let s anayse the issue of forecast adaptabiity and achieving given obectives. Let, O 1, V 1 be the optima forecast version that meets the foowing conditions: Based on this structure of the forecast the necessary materia base can be determined. Let the optima forecast version described by the above equations be the initia version for the forecast time horizon and we wi assume that at a random given time of the forecast horizon, the environment and interna production factors change thus infuencing achieving the initia version. In consequence an updated version wi be deveoped: 382

6 Introducing the eements,, 1 2 we highight the fact that by changing the conditions in which the forecast was made, the coefficients have aso changed. We wi ca this structure of the forecast as being stabe if: O 1 O2 and V 1 V2. Observation: any random change that has appeared in the terms of making a forecast with stabe structure wi not affect achieving the obectives of the initia version. Furthermore, the means of achieving them wi remain unchanged. However it is possibe at most changing ony the intensity of which the means are used, reason for which adusting the base of the optima version is nu both in terms of widening and narrowing it. The forecast structure wi be absoutey inert if: O2 O1 and V 2 V1. It resuts that the forecast wi be absoutey inert if for some reason the adustment of the optima base (in terms or widening it) is not possibe in the time horizon. For such forecasts there are possibiities of narrowing them. We find that for the 2 types of forecast structures (absoutey inert and stabe) it is not possibe that for the adusted optima version to introduce new obectives or means of achieving them. Furthermore, no matter the time t *, when changes in the conditions to make the forecasts are invoved, they ead to the change of the initia optima base. If the obectives and the means of achieving them from the corrected forecast wi be disointed from those of the initia version, there wi be the possibiity of absoutey adustment (fu). Thus, the forecast wi be absoutey adaptabe if: O 1 O2. Most of the times the forecasts structures (initia and corrected) intersect: O 1 O 2. We can characterize this intersection by the degree of inertia of the initia base (of the optima forecast) at a given time. The main factors that infuence the degree of inertia of the initia optima forecast base are: time, economic factors and preparing the materia base. The time factor does not infuence, during the deveopment of the updated forecast version, the forecast s adaptation because it wi incude the entire initia base deveoped unti the moment. This wi infuence the deveopment mode of new versions of forecasts if the products have a arge manufacturing cyce and if their reease into production is required before the moment. If the economy or the branch moves from an intensive deveopment strategy the forecasts wi be affected when the new strategy wi be impemented. If T T, then the base adaptation pan is nu. IfT T, modifying the initia base is possibe for the period but the enterprise operation inertia degree wi be much bigger and the necessary timeframe for the reorganization wi be much onger. 383

7 As for the economic factors we woud ike to point out that any adustment to the forecast to the new conditions wi attract, usuay, additiona expenses that are the main anaysis criteria of the opportunity to transition to a new way of working. They determine the increase of inertia in the initia optima forecast in term of organization deveopment. It is possibe that, by correcting the initia forecast, an aready achieved part of it wi be reected (some capacities wi be conserved if they refer to the investment pan). Idea woud be if the new forecast pans wi incude every achieved obective with the risk of reducing the chance of partia adustment in its updating phase. In these conditions there is the benefit of reducing the possibiity of disruptive events to occur. Preparing the materia base imits the forecast s adaptabiity for medium and arge horizons mosty due to the resources that require a ong acquisition time (or connected investments). Furthermore, it is recommended that at the time of the forecast adustment the additiona obectives wi not exceed more than 10-20% of the activity voume due to the imited possibiity to assure the materia base and/or if the remaining timeframe is too sma for them to be carried out. Thus we concude that the units that have in their manufacturing profie products with ong manufacturing cyces have a greater degree of forecast inertia. Furthermore, the adusting of the forecast wi be made when the additiona expenditures occurred by the adustment as we as the osses occurred by not adusting it wi be recovered through the new forecast version. 4. ORGANIZATIONAL CHANGES Another issue that the adaptive forecast management of the enterprises needs to address is that of the organizationa changes which may cover one or more of the 4 basic eements of the organization: strategy, technoogy, structure and the organizationa cuture. Romania sti has an economy based on intensive resource consumption, a society that is sti in search of a unified view and a natura capita affected by the risk of damage that can become irreversibe. This approach invoves a bigger effort from an organizationa point of view and consistent resources spread over a onger period of time compared with previous. Usuay, the strategy changes when the organizations are forced by surviva reasons or as a reaction to some chaenges. The accumuated experience in this domain does not recommend such changes during crisis or under the short-term pressure of time. Technoogica change invoves the change/modernization of technoogica fow, changing the work conditions for the empoyees, the way the enterprise manufactures and markets its products and services (Badea, et a., 1999). Changing the organization structure impies changing severa organizationa components which can generate resistance from the empoyees part. It is natura, that any organizationa change invoves the change of its cuture, on severa eves (gaining new skis, changing attitudes, beiefs and behaviours). 384

8 The experience gained in our country and goba in organizationa change management pointed out that for its impementation the foowing steps must be taken (Luecke, 2003): Step 1. Identifying the organization s probems and soutions Step 2. Deveoping a shared vision upon organizing and managing change in order to assure competitiveness Step 3. Identifying the eadership Step 4. Concentrating on the resuts and not on the activities Step 5. Initiating change in periphera departments and natura spread to other departments, without imposing from top to bottom Step 6. Formaizing the achieved success by instituting new poicies, systems and structures at an organizationa eve Step 7. Monitoring and adapting strategies as an answer to the issues raised by the change process. In practice, impementing the change process must consider a certain degree of fexibiity in order to aow adaptation over time and managing the deviations from the initia forecast. Moreover, the best soution is the personaized one for organization/department, respectivey particuar situation and the pursued obectives and not an important one; the human resources department must not be accountabe for the impementation of the change process, detrimenta to the department managers. An essentia probem in the organizationa change management represents overcoming the empoyee`s resistance to change, that may resort to strikes, negigence at work, morae decrease. Impementing change piecewise, successivey, may resut in time to a systemic change, but it wi be sustainabe if there is a change/shift of the baance between systems throughout the entire organization (Kebapci and Erka, 2009). 5. INTERACTIVE SYSTEM FOR ASSISTING THE ECONOMIC ORGANIZATIONS ADAPTIVE FORECAST MANAGEMENT To faciitate adaptation, in a short time, of the forecasts to the current and future evoution (estimated) a system that assists decision-makers has been deveoped both at a strategic and operationa eve (Andreica et a., 2014). We wi present the steps and stages invoved in accessing the system. The steps necessary for forecast corrections are: 1. Economic indicators are initiaized from previous forecasts with the current year s vaues 2. The decision-maker seects the order in which the indicators wi be simuated with the observation that the first one wi have its evoution simuated independent of the others. Ony the second and the other ones wi be simuated in functiona and structura correation with the indicators simuated in previous iterations. There may be exceptions. 3. If the simuation is made independent of other indicators, then the system wi use one of the 11 procedures incuded, thus showing the seected indicator s evoution for the forecasted horizon. 385

9 4. If the simuation is made in correation to other indicators, then for each indicator one or more predefined procedures wi be generated in the system. It is possibe that additiona data or work hypotheses may be required. 5. The indicators vaues obtained in the 3rd and 4th stage wi be vaidated by the users, and in case a the indicators have been simuated and the data was accepted by the users, the simuation modue wi come to a stop. 6. If not a the indicators have been simuated, then the procedure resumes from stage If a the indicators have been simuated but are not accepted by the users, then the procedure resumes from stage 2 with the reformuation of hypotheses. Observation 1: The simuation modue is based on a procedura simuation mode of economic indicators structures that has been experimented in practice. The steps necessary to correct the forecasts (pans) are: Version 1. The initia structure of the manufacturing cassification remains unchanged Steps and stages: 1. In the initia harmonizing mode of the resources with the obectives, the avaiabe resources are reduced with the ones reated to the obectives (products) aready made. 2. The obectives restrictions wi be updated by decreasing the right member with the ones aready made. 3. The restrictions of resources and obectives are reaxed by introducing toerance variabes. 4. The obective function is created by summing the associated toerance variabes and the weight coefficients whose vaue wi direct the product seection process from the updated pan. The arger vaues wi be associated to those resources for which the suppy possibiities are imited, respectivey to the obectives for which the correction margin is sma. The optimization direction is to minimize the sum of the associated toerances. Stage 1. The harmonization mode of the obectives with the resources is soved foowing the minimization of the toerances sum. The optima soution wi show us if the initia equation system is compatibe without the need of toerances (if the obective function s vaue is 0) respectivey, how much more resources we need to add and/or change the obectives in order to have a compatibe equation system. Observation 2. The users can associate toerances ony to some of the resources without changing the initia obectives thus ooking to identify the minimum additiona resources needed which aows harmonizing the resources with the minimum eve of the obectives, or to associate toerances ony to the obectives ooking to identify the minimum quantity/vaue to reduce the obectives as so to fuy capitaize the avaiabe resources. If the 2 restriction categories wi be reaxed simutaneousy we wi seek for the smaest deviation from the obectives whie suppementing the resources with the smaest possibe amounts. 386

10 Stage 2. The right member of the harmonization mode of obectives with the resources is actuaized with the optima vaues resuted from the optimization process from the previous stage and the optimization process resumes with the initia obective function. The optima soution wi point out the updated obectives for the remaining timeframe unti the end of the initia forecast horizon. Version 2. The manufacturing cassification is changed partiay or totay The harmonization mode of the obectives with the resources is reconfigured and the 2 stage optimization process from above resumes. Observation 3. Fexibe optimization procedures are at the base of the harmonization mode. In a near future, these wi be extended with robust optimization modes. 6. CONCLUSIONS In times of economic instabiity a prudent and adaptive forecast management is more than needed. There is the risk of consuming the resources for achieving obectives that have no market, thus eading to bankruptcy. Practicay, in any given time the decision-makers need to have aternative strategies of evoution for different hypotheses regarding the business environment (Andreica et a., 2013; Popescu et a., 2014). The authors tried to meet the decisionmakers needs by deveoping an interactive system to assist the economic enterprises adaptive forecast management. This system was experimented on severa economic organizations and wi be extended to a higher number of instances than it has been unti now. ACKNOWLEDGEMENT This paper was co-financed from the European Socia Fund, through the Sectoria Operationa Programme Human Resources Deveopment , proect number POSDRU/159/1.5/S/ "Exceence in scientific interdiscipinary research, doctora and postdoctora, in the economic, socia and medica fieds -EXCELIS", coordinator The Bucharest University of Economic Studies. 387

11 REFERENCES Andreica, M., Popescu, M.E., Micu, D. (2014) Proposa of a SMEs Forecast Management Support System, Review of Internationa Comparative Management, Vo. 15, Issue 2, pp Andreica M. (2011) Previziune microeconomica, Editura Cibernetica MC, Bucharest Andreica M. (1988) Metode şi modee de panificare, Editura Ştiinţifică şi Encicopedică, Bucharest Andreica M., Andreica M.E., Micu D. (2013) Concusions on modeing deveopment programs within economic organizations, The 7th Internationa Management Conference, Bucharest Badea F., Bagu C., Deac V. (1999) Managementu productiei industriae, Editura CH BECK, Bucharest Carnot N., Koen V., Tissot B. (2005) Economic forecasting, Editura Pagrave Macmian, New York Kebapci, S., Erka, H. (2009) Resistance to change. A Constructive approach for managing resistant behaviours, Batic Business Schoo, University of Kamar, Kamar, Suedia (90 pp.) Luecke, R. (2003). Managing change and transition, Harvard Business Schoo Press, Boston, S.U.A. (148 pp.) Micu, D., Lefter, C. (2011). Forecast management for the economic system, The 5th Internationa Management Conference, Bucharest Popescu, M.E., Andreica, M., Micu, D. (2014) A method to improve economic performance evauation using cassification tree modes, European Journa of Business and Socia Sciences, Vo. 3, No. 4, pp