Forecasting

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Demand Forecasting Importance
Demand forecasts form the basis of all supply chain planning. Forecast of future demand are essential for making accurate supply chain decisions and ensuring the company’s success. Examples of such decisions include how much of the product to make, how much to inventory, how much to replenish and how much to order. Ease of Forecasting

Beverages are a push product. Forecasting is not easy in the beverage industry as there are possible serious fluctuations in demand due to seasonal changes in winter and summer, which cannot easily predicted beforehand or controlled. Therefore, accurate forecasting can be difficult at times, and there is a margin for error. However, having multiple product lines and daily planning procedures do decrease risk of error by high responsiveness. FORECASTING METHOD FOR SOFTDRINK

Forecasting Methods
A combination of three forecasting methods is used. The followingmethods are used in combination for the purpose of sales and demand forecasting:-

1. Time-Series Method
Historical demand data can be effectively used to forecast future demand.

2. Qualitative Method
Using historical data and market intelligence as a guide, PepsiCo management practices their own judgement to determine the demand forecasted in this way which is then further divided into monthly, weekly and daily plans accordingly.

3. Causal Method
Causal forecasting assumes that the demand forecast is highly correlated with certain factors in the environment such as the state of the economy, interest rates, and product pricing that can cause a change in the demand. An example is how by introducing a product variant, such as Pepsi Twist, can influence demand for the original product that is Pepsi.
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