Wal-Mart currently represents the largest retailer in the world, which indicates that this organization provides an excellent paradigm for examining the concept of forecasting and planning from a human resource management perspective. One area that would benefit significantly from forecasting and planning would be determining seasonal labor requirements during an upcoming holiday season. Essentially, Wal-Mart experiences a significant increase in sales volume between Thanksgiving and Christmas compared to the rest of the year. As a result, Wal-Mart needs to conduct forecasting in order to effectively plan how much seasonal labor to obtain in order to ensure that the increased sales volume is effectively supported, while at the same time, ensuring that excess labor is minimized. Certain concerns could arise with regard to forecasting seasonal labor needs as this forecast ultimately depends on the forecasts associated with anticipated sales volumes. A number of factors are involved in the development of sales volume forecasts, and although they are relatively accurate, they may not be accurate enough to ensure Wal-Mart can develop a precise forecast for hiring seasonal labor with optimal efficiency.
According to Shim & Siegel (2009) there are a number of steps involved in the forecasting process that should be utilized to develop accurate forecasts for organizational planning, such as the example discussed in the preceding paragraph. The first four of these steps will be utilized within this assignment in order to further examine the forecasting process with regard to Wal-Mart’s seasonal labor requirements. Each of these steps will be detailed below.
Step 1: Determine the ‘what’ and ‘why’ of the forecast that what will be needed.
Relative to the issue of Wal-Mart’s requirement for seasonal labor, this forecasting process will seek to determine exactly how many man hours will be required to effectively cover the increase in sales volumes that correspond with the holiday shopping season. This forecast is needed so that Wal-Mart can seek out and hire seasonal part-time help based on the specific amount of additional man hours that need to be covered. In order to achieve this, Wal-Mart will need to have access to a forecast of the projected sales volumes during the holiday shopping season so that an accurate estimate can be gained with regard to how much of an increase sales volumes are expected to be when compared to that of other times of the year.
Step 2: Establish a time horizon, short or long term.
For the purposes of this forecast, the time horizon will be relatively short, as it seeks to determine the amount of seasonal labor needed to cover the one month timeframe of the holiday shopping season.
Step 3: Select a forecasting technique
Importantly, the overall accuracy and applicability of a forecast is highly dependent upon the forecasting technique that is utilized to facilitate it. For the purposes of forecasting the seasonal labor Wal-Mart will need to cover increases in sales volume during the holiday season, several forecasting techniques could be used to help facilitate this process effectively. From a qualitative standpoint, executive opinions may be an effective technique to facilitate accurate forecasting as the executives generally possess extensive expertise regarding planning and the overall expectations of sales performance. In addition, there is significant value in gaining insights to forecasting through the polling of executive opinions. A quantitative forecasting technique that would be extremely effective in this case would be trend analysis, which is a process that examines historical data from the past, such as the amount of seasonal labor that was needed in previous years during the holiday shopping season to determine the amount of seasonal labor that may be required in the current year.
Step 4: Gather the data and develop a forecast
One of the most critical parts of the forecasting process is gathering the specific data that is appropriate to develop an accurate forecast. Importantly, the historical data needed for the quantitative trend analysis will need to be gathered from HR records regarding the specific level of seasonal help that was needed during past years to support increased sales volumes during the holiday shopping seasons. This data should be readily available and highly accurate, while will be extremely helpful in facilitating an accurate forecast for the current year.
Based on the information that has been covered in the preceding paragraphs with regard to forecasting tools, it appears that the quantitative approach of trend analysis using historical data would be the most appropriate for what Wal-Mart is attempting to forecast. Specifically, examining past trends can shed significant light on what to expect in the coming year. The precision of this approach will likely not be 100% spot on, yet it represents an approach that will provide far more accurate results than many of the other forecasting tools available to Wal-Mart HRM professionals.
Ultimately, the advantages of the qualitative forecasting approach of executive opinion is that it provides a strategic view that could shed significant light on broader planning elements. The disadvantages associated with this approach include the fact that executive opinions can provide little accuracy for a store by store basis as the Wal-Mart network of stores is extensive, while each has a different sales volume and customer base. The quantitative forecasting approach of trend analysis can be highly advantageous to Wal-Mart as it provides sound historical data that indicates the specific increases in sales volume that occurred during past years, while also detailing the specific labor hours that were needed to effectively cover this increased sales volume. Despite this, the disadvantage of this approach is that it lacks precision. Essentially, managers can only use this information to get a ballpark estimate that may fall short or exceed the actual amount of seasonal labor Wal-Mart ends up needing during the holiday shopping season.