Demand Forecasting Method in Abu Dhabi National Oil Company - Assignment Example

Demand forecasting at ADNOC Name Institution Date Abstract Abu Dhabi National Oil Company is one of the most prosperous companies in the United Arabs Emirates. It deals with oil and gas exploration and drilling. The success of the company is attributed to the methods used to forecast the future demands. The judgmental methods involve the manipulation and analysis of data and the use of the reference class forecasting is for the purposes of addressing the factors that may impact the future demand negatively. On the other hand, a good number of concepts used by the company to tackle the issues of future forecasting of demand are mainly judgmental. This is through the utilization of the past and present data in order to determine the future demand. This has been made possible for the company through the presence of experts in the company. Other economical factors that impact the future demand are also put into consideration so as to caution the company in future. However, it is recommended that the company should put in place measures that are more comprehensive in order to address all the issues that affect the future demand. The technological methods of forecasting the demand has been recommended with the aim of increasing the accuracy of the results. Introduction Forecasting of demand is one of the most important concept that guides the production and operations of a company. This is because it involves the predicting the amount of products that will be consumed by the customers (Ellis, 2010). The forecasting of demand is significant in terms of preventing losses for the company. Producing more goods than the actual demand will definitely lead to the losses for the company. On the other hand, producing a low number of products especially when the demand is high will also impact negatively on the profits of the company. It is thus important to note that the consumer behavior is important for an organization in terms of forecasting the demand. The methods of forecasting demand however, vary due to various factors. The type of goods and services produced by a company determines the demand forecasting method used by an organization. It is also important to note that some goods and services are seasonal and hence influence the methods of forecasting the demand. The concepts of demand forecasting are thus important for the development of a business. The paper therefore, critically discusses the concepts of forecasting demand in relation to Abu Dhabi National Oil Company (ADNOC). History of the company Abu Dhabi National Oil Company was established in 1971 by the government in the United Arab Emirates. The company is based in the oil and gas sector which is the most important sector in the United Arab Emirates in terms of income generation for the country in terms of exports. The mandate of the company was to spearhead the exploration and production of oil and gas in Abu Dhabi. The company has since grown and it has about fifteen subsidiaries which aid the company in its operations (Abu Dhabi National Oil Company, 2013). This has enabled the company to grow extensively and it is currently undertaking other functions like oil refining and gas processing. The company has emerged as one of the most profitable companies in the United Arab Emirate. The company also trains personnel on maters regarding the production and extraction of oil and gases. To achieve the objectives of the company, some measures have been put in place to ensure the growth and development of the company. The chairman of the supreme petroleum council who is also the president of the United Arab Emirates is responsible for the formulation and implementation of policies with regards to the oil sector. The increase in demand for the oil and gases has also impacted positively on the company. The selection of the company for the study was due to the success of the company in the oil industry and its ability to meet the huge demand for oil and gas both locally and internationally. Discussion The oil sector plays an important role in the growth and development of the United Arab Emirate economy. This is also one of the objectives of the company as a government body. To achieve this goal and the other objectives of the company, it is important for the company to forecast the future demand. This is also considering that the oil and gas are natural resources. Some of the oil and gas fields may end up being exhausted after a period of time and hence the importance of the future forecast in terms of the demand. The method that is employed by the company in terms of forecasting the future demands is mainly judgmental. This method mainly involves the statistical analysis of the data in order to come up with the future forecasts. It is also important to note that the company is concerned about the increasing demand for its products. This is attributed to the high purchase of motor vehicles and the popularity of the cooking gas. This means that the company has to be more efficient in its operations as well as ensure that its exploration process is enhanced. This is for the purpose of ensuring that more oil and gas fields are discovered in order to meet the future demand. All theses statistics as are as a result also suggests that the company has to be more aggressive in order to deal with the factors that may impact negatively on the demand of the products of the company (Ferbar, et al, 2009). Oil and gas are very important commodities in the world. The demand for oil and gas is always on the increase. This is because the products are consumed throughout the year. In order to meet the local and international demand, the company utilizes the reference class forecasting. Through this method, the company utilizes the past experience for the purpose of predicting the future. The past experience is important in terms of coming up with the trends in the consumption of oil. A part from using the past and present experience, other techniques is used during the reference class forecasting. It is also important to note that the company has to meet the demands of the customers regardless of the number. This method of forecasting is important in terms of ensuring that enough oil and gas is produced in advance. The consumption of the products of the company is also influence by external factors. The company therefore considers population as one of the guiding factors for the purpose of forecasting the demand. It is also important to note that the increase in population leads to the higher consumption of the products of the company. The numbers of motor vehicles are also on the increase as the population keeps on increasing. This is one of the factors that the company considers when projecting the demand. The population is thus of the reference that is used for the purpose of forecasting the future demand of oil and gas products. The use of population as a reference has led to the increase in production and hence the customer satisfaction (Lewis, 2012). The company has been operating for decades and it has adequate data on the consumption trends. Through the use of this data, the company is able to carryout an analysis of the consumption trend. Through the analysis of the data, mathematically analysis is usually carried out by the company. This is possible as the company has enough economists in its ranks that are responsible for the forecasting of the demand. The use of linear graphs is important when using this method to forecast the demand. The interpretation of the data is then used for the purpose of production. This method is accurate due to the availability of the data. However a few errors may occur when using the data. To eliminate the errors, the company has embraced the use of technology in the calculations. The use of technology is not only accurate but efficient in forecasting the demand. It is through the use of the past data that the company has been able to meet the high demand for the oil products both locally and internationally. The analysis of the graphs is also done by establishing a trend line that is used for forecasting the future demand. The trend line is important in terms of giving the expected demand in future and hence determining the capacity that the company needs to produce. Through the forecast of future demand using this method, the company has avoided wastage and has been able to maintain the production of oil and gas. Forecasting the demand in the oil sector is important in terms of eliminating uncertainties as well as wastage (Bacchetti, et al, 2012). The use of economic indicators is also one of the methods that are used to forecast the demand by the company. Oil and gas are among the most precious commodities in the world. This is due to their daily consumption and hence the high demand. However, it is also important to note that the economic factors have a great impact on the oil prices. The price of oil therefore keeps on fluctuating and hence affecting the demand. The fluctuation that has been witnessed in the recent past has greatly impacted the prices of oil and hence the future demand. The higher the prices of oil, the lower the demand. Inflation is one of the economic indicators that affect the price of oil. The company therefore calculates the inflation rate so as to determine the future demands. The use of mathematical equations is usually applicable when calculating the future demand of the oil in terms of inflation. It is through the use of the economists of the company that the calculations are usually made. This was responsible for saving the company from overproducing oil and gas during the inflation that led to the global recession. Although the products of the company are non perishable, overproduction has a lot of negative impacts in terms of costs. The refinery of oil as well processing of gas is quite costly. It will thus be inconvenient for the company to overproduce when the future demand will be low. The economic indicators are thus important in terms of forecasting the future demands for a company (Huang, 2009). Rule based forecasting is also an important method that is used by the company in order to ensure that the present issues are put in place when forecasting the demand. The method is statistical and it also involves the analysis of data. This method is for the purpose of strengthening the other existing methods when there is a variance in the results. This method is applicable in the company due to the availability of the data within the company. The concepts are usually applied in four steps to ensure the method is successful. Using this technique involves the separate treatment of the trends and the levels. The trend that the company is more interested in is the consumer behavior of its products in relation to the prevailing economic situation. This is because the economic trends greatly affect the demand of the products of the company. Through the use of this method, it is possible for the company to make long term as well as short term forecast in relation to the demand of its products. However, it is important to note that this method is quite complicated and it takes a long period of time to forecast the future demands. The company also offers a variety of oil and gas products and hence the need of using this method of forecast to determine the demand of its products in future. The accuracy of this method is usually high as compared to the other statistical methods of forecasting for demand and hence its popularity (Zhu, 2010). The time series projection is an important method of ensuring g that the company is able to forecast the future demands. This method is also closely associated with the other statistical methods of forecasting the demand for the products of the company. The use of previous data and the current data is important in terms of forecasting the demand. The main advantage of this method is its emphasis on the unexpected events that may impact the demand. It is through this method that the company is able to establish the risk factors in the future in relation to the demand. The company has an estimate of the number of customers that it is supposed to serve. This is important during forecasting the future demand. This is because uncertainties may occur in a certain area while another area is not affected by the uncertainty. This means that the company has to ensure that the areas that are not affected by the uncertainties continue to benefit from its services. An example being the economic recession in most parts of Europe where it had severe impacts on the demand of oil. However, the economic recession had little impacts in some parts of Asia where the company supplies its products. The company has however been able to meet the demand through the earlier forecasts on the demands. It is thus evident that the future forecast on demand plays an important role in aiding the production rates of the company (Behrang, et al, 2011). Recommendations The forecasting methods that are used by the company are good and also effective in terms of being results oriented. However to ensure the full success and accuracy of the future forecasts, it is recommended that some measures should be put in place. One of the measures that the company should consider is to fully embrace technological means of forecasting the future demands. The technological means are accurate and easy to use and hence reducing the paperwork involved during the projection. Some common errors that may impact negatively on the future demands always arise when using the judgmental means of forecasting the future demands. It is thus essential for the company to ensure that it has trained personnel who are able to utilize the technological mean during the forecasting process. Although the company puts into consideration the economic and other factors that have an impact on the future demand of its products, more measures should be included. It is important for the company to put into consideration other factors like new entrants and alternative products so as to establish the real demand. This is due to the increased calls for reduction carbon emission. Some of the products of the company are responsible for carbon emission which has a negative impact on the environment. This may lead to the development of alternative products that may impact negatively on the demand of the products of the company. It is thus important for the company to adopt the methods that are conclusive and hence the accuracy of the results. Conclusion In conclusion, the future forecast of demand by the company plays an important role in the growth and development of the company. It is evident that the future forecast of demand has enabled the company to implement some of the important growth strategies. The strategies have also been important for the company in terms of cautioning it against the future uncertainties. The methods used by the company to forecast the future demands are also efficient although it is recommended that the company should use a combination of methods. The use of the statistical data is important for the company as it has been in operation for decades. This means that the company is able to use the past records for the purpose of predicting the future. The use of the past records has enabled the company to use the judgmental methods of forecasting the future demands. It has also made the work of the company easier when addressing the demands of the company. However, it is important to note that the future demand is undermined by emerging events within the oil sector and the economy. Economic recession and the global need for environmental protection are some of the challenges that are likely to affect the future demands. However it is also important for the company to use the technological methods to ensure the accuracy of the results in relations to the forecast of the future demand. It is also evident that the method of future forecasting for demand determines the accuracy of the results. References Abu Dhabi National Oil Company. (2013). About ADNOC. Retrieved on 21 April 2013 from, Ellis, K. (2010). Production Planning and Inventory Control. McGraw-Hill. Tiacci, L. (2009). An approach to evaluate the impact of interaction between demand forecasting method and stock control policy on the inventory system performances. International Journal of Production Economics, 118(1), 63-71. Ferbar, L. et al. (2009). Demand forecasting methods in a supply chain: Smoothing and denoising. International Journal of Production Economics, 118(1), 49-54. Lewis, C. (2012). Demand forecasting and inventory control. Routledge. Bacchetti, A. et al. (2012). Spare parts classification and demand forecasting for stock control: Investigating the gap between research and practice. Omega, 40(6), 722-737. Huang, M. G. (2009). Real options approach-based demand forecasting method for a range of products with highly volatile and correlated demand. European journal of operational research, 198(3), 867-877. Zhu, M. (2010). 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