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Introduction
Synopsis of Mini-Case 9.1: Building a New Urgent Care Center (pp XXXXXXXXXX; Lee textbook): In this case, Kim, who works in the marketing department of Providence, has shared the methodology they used to forecast client volumes and profits for the new urgent care center when it opens. Angel, a member of the Providence leadership team, isn’t certain that the marketing department’s forecast has taken into account many important variables that could result in different projections.
This case illustrates one important use of forecasting, which is projecting consumer demand for new products and services. This is an important component of capital budgeting. Organizations don’t want to make large capital investments in projects, such as new builds, if the projected volume of clients will not generate the needed revenues to recoup the initial investment, cover the operating costs (direct, indirect, fixed, and variable), and generate a healthy profit margin. Making and interpreting forecasts is an essential competency for managers. There are many methodological approaches used to create forecasts, such as naïve, percentage adjustment, moving average, weighted average, exponential smoothing, seasonal regression, etc. It is important to keep in mind, that forecasting isn’t an exact science, since it incorporates judgments and assumptions—many of which can be questions, as is the case in this scenario. In addition, forecasts tend to be more accurate when the projections are for a shorter period of time (n).
Sources
Lee, R. H XXXXXXXXXXEconomics for Healthcare Managers Third edition. Chicago, Ill: Health Administration PressÂ
Unit Learning Outcomes
ULO 1. Use demand and supply analysis to make simple forecasts. (CLO 6 and 7) ULO 2. Appropriately apply simple forecasting tools. (CLO 6 and 7)
Directions
Initial Posting
The student, functioning as the Chief Operations Officer, for Providence, was approached by Angel...