Read the words to the text and their translation. Try to memorize them. It will definitely help you grasp the main idea the details in the following text.

error	– ошибка
value	– стоимость, цена; оценка; величина, значение
excess	– избыток, превышение
to delay	– отсрочивать, задерживать
shipment	– груз, партия товара
to outweigh	– превосходить, перевешивать
revenue	– годовой доход
assumption	– предположение, допущение
layoff	– приостановка / сокращение производства
price cut	– снижение цен
cash	– деньги; наличные деньги
capital	– состояние, капитал
obsolescence	– устаревание
goodwill	– ценность фирмы (определяющаяся её клиентурой, репутацией)
overtime	– плата за сверхурочную работу
capacity	– мощность; производительность
to bottleneck	– создавать затор / пробку

Translate the following text. Use a dictionary if necessary.

The Costs of Forecast Errors

If a sales forecast has a large standard error (a wide range of possible values), logisticians should consider the costs of overestimating and underestimating demand. There are different kinds of consequences associated with overestimating and underestimating company sales. For some firms, the cost of holding excess inventory may be extremely high (perhaps because the product is perishable) while the amount of sales lost because of delayed shipments is very low (perhaps because the company has loyal customers). Accordingly, if a firm is in that situation, logistical management will be more willing to risk underestimation than overestimation. This is because the cost of excess inventory resulting from excess production will outweigh the lost revenue from an in adequate level of production. To illustrate the point, assume that a logistician has been given a company sales forecast of 200.000 units with a standard error of 10.000 units. In using this information, the logistician may choose to plan around a level somewhat lower or higher than 200.000. But, if the cost of holding excess inventory may be very high and the costs of overestimation are greater for that firm, logisticians will probably want to base decisions on a forecast that is more conservative than 200.000 units.

In sum, logisticians must recognize that sales forecasts are only estimates and are based on certain assumptions. By being aware of these assumptions and the nature of the risks associated with forecast errors, logisticians should be able to make better judgments on how to use the forecast.

Possible Results of Company Sales Forecast Errors

Results of Overestimation

Excess capacity wading to layoffs, loss of skilled labor.

Price cults or additional marketing expenses to move product.

Distributor ill will because of excess distributor inventories.

Inventory costs:

Cash flow problems ad cost of capital tied up in finished goods, components, raw materials.

Technical obsolescence or damage.

Storage or warehousing cost.

Results of Underestimation

Lost sales or customer goodwill.

Overtime costs.

Costs of expending shipments.

Reduced quality control due to reduced maintenance of machinery at full production capacity.

Production bottlenecks due to lack of materials and parts.

Read the text once again. Find the topic sentence, then list the details that support it.

4. Explain the following notions in writing:

- Time-Series Analysis

- Variables

- Forecast

Give English interpretation of the following Russian passage.

Очень часто в отчётах или других рабочих документах бывает необходимо описать существующие тенденции. Для того, чтобы проиллюстрировать свои выводы, люди используют графики и таблицы. В таблицах информация представлена в легко доступной форме. Ключ к пониманию таблиц состоит в том, чтобы прочесть её название и текст в колонках. Эти пояснения плюс сноски, если они есть, помогут вам разобраться в том, что означают цифры в таблицах. Сами по себе без пояснений цифры ничего не означают.

SUPPLEMENTARY UNIT

Managing changes in demand

This unit looks at the challenge of dealing with unexpected increases in demand and suggests ways companies can manage it.

Before you read

Discuss these questions.

1.	What can cause temporary increases in demand for retail products? Which are predicable, e.g. a national holiday period? Which are unpredictable, e.g. unexpected popularity of a new toy or gadget?
2.	What are the consequences if a company isn’t able to deal with sudden changes in demand for its products, e.g. product shortages, obsolete stock?
3.	What can a company do to make sure its supply chain can handle variations in demand?

Reading

	Make sure you have your Christmas stock in
1 2 3 4 5 6 7 8	by Alison Maitland   A Every year at Christmas, much-advertised products disappear from the shelves long before most people have done their Christmas shopping, leaving consumers disappointed and frustrated.
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57	B Forecasting the right quantity of a product and getting it to the right place at the right time is a tough challenge for businesses, especially when the item is new. ‘It is the exciting products that are hard to forecast’, says Martin Smith. Head of the Manufacturing Industries Practice at PA Consulting. C The continuation of pre-Christmas sell-outs, despite the use of sophisticated forecasting tools, has led to suspicions that companies ration the supply or even withhold ‘must-have’ goods to create interest among consumers. PA Consulting’s Martin Smith thinks this is unlikely. ‘If companies run out of stock, it won’t help them maximise the profits they can make from a new product’. D But Yossi Sheffi, Director of Massachusetts Institute of Technology’s Centre for Transportation and Logistics, says it is not unusual for companies to announce expected shortages when launching a new product. ‘People want more of something that scarce. Most manufacturers will give newspapers these stories because they increase demand and help future sales’. E But the danger is that actual shortages, especially in the period up to Christmas, will alienate customers, as well as lose potential sales. Another risk of running out of a ‘must-have’ product is that when supplies start again, the fashion may have passed. This can leave companies with unwanted stock. F Getting stock levels right is not so much about perfecting forecasts as about building flexibility into the supply chain. Where possible, that means broadening the supply base so that manufacturers can step up production quickly in different locations, and use components from different sources. G According to Professor Sheffi, one example of this kind of multi-sourcing is Hewlett-Packard. HP makes Deskjet printers for North America in plants in Vancouver and Singapore. Vancouver is more flexible and closer to the market, but more costly. So HP gives stable, high-volume production to Singapore and uses Vancouver to meet temporary surges in demand. H Agreeing flexible contracts with suppliers is another solution that enables companies to increase or decrease production rapidly. Jabil Circuit, a US electronic manufacturing services company, requires suppliers to be able to boots deliveries by 25 per cent with a week’s notice, and by 100 per cent with four week’s notice. I Forecasting can be made more accurate by collecting together predictions of customer demand across a wide region rather than responding on a store-by-store basis, according to Professor Sheffi. By using common components in different products, companies can also put together their forecasts for these products to give a more accurate picture of demand for the parts. J A responsive supply chain depends on good communication between all its participants. In companies that do this well, there is a free flow of information, says Professor Sheffi. ‘For example, Toyota displays continuous production reports in its plants, and Dell updates managers hourly on production’.

Vocabulary