Demand Forecasting
DEMAND FORECASTING
Demand forecasting is the activity of estimating the quantity of a product or service that consumers will purchase. Demand forecasting involves techniques including both informal methods, such as educated guesses, and quantitative methods, such as the use of historical sales data or current data from test markets. Demand forecasting may be used in making pricing decisions, in assessing future capacity requirements, or in making decisions on whether to enter a new market. Knowledge of how demand will fluctuate enables the supplier to keep the right amount of stock on hand. If demand is underestimated, sales can be lost due to the lack of supply of goods. If demand is overestimated, the supplier is left with a surplus that can also be a financial drain. Understanding demand makes a company more competitive in the marketplace. Understanding demand and the ability to accurately predict it is imperative for efficient manufacturers, suppliers, and retailers. To be able to meet consumers’ needs, appropriate forecasting models are vital. Although no forecasting model is flawless, unnecessary costs stemming from too much or too little supply can often be avoided using data mining methods. Using these techniques, a business is better prepared to meet the actual demands of its customers.
MEANING, NATURE AND THE ROLE PLAYED BY DEMAND FORECAST IN THE OPERATIONS OF BUSINESS-
Estimates of expected future conditions are called forecasts and estimates of expected future demand conditions are called demand forecasts. Precise forecasts of future developments are clearly impossible. Expectations depend on the assumption made. The reliability of the forecasts hence depends on the reliability of the assumption. The assumptions and methods employed in forecasting depend upon the nature of the planning required. There are two major types of planning which require the use of forecasts. They are (1) Short term planning and (2) long-term planning. In industrially
Demand forecasting is the activity of estimating the quantity of a product or service that consumers will purchase. Demand forecasting involves techniques including both informal methods, such as educated guesses, and quantitative methods, such as the use of historical sales data or current data from test markets. Demand forecasting may be used in making pricing decisions, in assessing future capacity requirements, or in making decisions on whether to enter a new market. Knowledge of how demand will fluctuate enables the supplier to keep the right amount of stock on hand. If demand is underestimated, sales can be lost due to the lack of supply of goods. If demand is overestimated, the supplier is left with a surplus that can also be a financial drain. Understanding demand makes a company more competitive in the marketplace. Understanding demand and the ability to accurately predict it is imperative for efficient manufacturers, suppliers, and retailers. To be able to meet consumers’ needs, appropriate forecasting models are vital. Although no forecasting model is flawless, unnecessary costs stemming from too much or too little supply can often be avoided using data mining methods. Using these techniques, a business is better prepared to meet the actual demands of its customers.
MEANING, NATURE AND THE ROLE PLAYED BY DEMAND FORECAST IN THE OPERATIONS OF BUSINESS-
Estimates of expected future conditions are called forecasts and estimates of expected future demand conditions are called demand forecasts. Precise forecasts of future developments are clearly impossible. Expectations depend on the assumption made. The reliability of the forecasts hence depends on the reliability of the assumption. The assumptions and methods employed in forecasting depend upon the nature of the planning required. There are two major types of planning which require the use of forecasts. They are (1) Short term planning and (2) long-term planning. In industrially