DEMAND FORECASTING

                                                     DEMAND FORECASTING

FIRSTLY WE STUDY WHAT IS FORECASTING ?

A forecasting is a prediction or estimation of future situation under given condition.

DEMAND FORECASTING:-  Demand forecasting is estimate of sales during a specifies future period based on proposed marketing plan and a set of particular uncontrollable and competitive forces. 

According to douglas" demand forecasting will be taken to mean the process of finding the values for demand in future time periods.

Objectives of demand forecasting:- 

*Short terms:-

- formulation of production policy

- formulation of price policy

- Maximum utilization of machines

- Proper control of sales

- Regular supply in material

- Arrangement of finance

- Regular availability of labour

* long term objectives:-

-long term finance management

-decision regarding production capacity

- labour requirements.

Importance of demand forecasting

- production the desired output

- assessing the probable demand

- forecasting sales figure

- better control

- Controlling inventory

- Planning import and export polices

- Assessing manpower requirement

DEMAND FORECASTING PROCESS

METHODS OF DEMAND FORECASTING

 There are two methods of demand forecasting

 

1) Qualitative methods :-Qualitative methods are used in traditional forecasting and involve a lot of experience, intuition and subjectivity.

In qualitative many methods are include:-

* The Delphi Model – This is an iterative process where experts within certain market segments are asked to generate forecasts.

* Sales Force Opinion – Here, sales teams are tasked with submitting a forecast for their respective area.  The forecasts are reviewed for realism and other input from senior managers and then become aggregated into a demand forecast.

* Market Research – In this technique, the company uses customer surveys to identify potential demand.

  

The survey may include 

personal, demographic, and economic information.

 

2) Quantitative methods:- .  Quantitative methods use data and analytical tools for prediction and are the types of methods used in automated demand forecasting software.

* Trend Projection – This technique uses pattern detection for analyzing historical data.  It is best when deployed for sales histories of over 24 months to allow for a large enough data.

* Barometric – Barometric demand forecasting uses present events to predict the future.  It may analyze factors such as leading, lagging or concurrent economic indicators that are put into an equation to generate a forecast

* Econometric – The econometric approach uses complex mathematical formulations to analyze data and variables that affect the data.  The equation is then fin-tuned and analyzed against historical data and a forecast is generated.

LIMITATION OF DEMAND FORECASTING

- lack of historical sales data

- cost incurred

- unrealistic assumption

- change in fashion

- lack of experience

- psychological factors

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