Demand forecasting – tools and techniques for entrepreneurs

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Demand forecasting – tools and techniques for entrepreneurs

  1. 1. DEMAND FORECASTING – TOOLS AND TECHNIQUES FOR ENTREPRENEURS by : DR. T.K. JAIN AFTERSCHO ☺ OL centre for social entrepreneurship sivakamu veterinary hospital road bikaner 334001 rajasthan, india FOR – PGPSE / CSE PARTICIPANTS [email_address] mobile : 91+9414430763
  2. 2. My words..... My purpose here is to give a few questions on fundamentals of statistics and business mathematics. I welcome your suggestions. I also request you to help me in spreading social entrepreneurship across the globe – for which I need support of you people – not of any VIP. With your help, I can spread the ideas – for which we stand....
  3. 3. Can we really forecast demand ? Demand is dependent on many factors like market trend, competition, business environment We cant predict exact demand. But using statistical tools, we can estimate demand, which can help us in production planning.
  4. 4. What are the methods for demand forecasting ? Delphi Nominal group technique opinion poll Moving average method Trend analysis Time series analysis
  5. 5. What is DELPHI ? Here we invite different experts and take their opinion and they finally try to find an average of their ideas. We again intimate the experts about the average opinion, and give them an opportunity to revise their forecast. Delphi is useful when you want to have an overall subjective assessment about complex business environment. All the experts are distant and they dont know each other, therefore each one tries to give the best possible estimate
  6. 6. What is Nominal Group Technique? It is similar to Delphi, but here we ask experts to sit together and explain their perspective to others so that others can also give their opinion. People frame their estimates individually, but thereafter they give justification for their opinion.
  7. 7. What is opinion poll method ? Here we collect information about the issue from people using opinion poll. We may take interview, we may collect data using questionnaire, or we may organise meeting / conference to find opinion of people. Variants of opinion poll are : focus group discussion – which is used in marketing to know about consumer opinions
  8. 8. Intuition method This is traditional method intuition = personal opinion on the basis of one's experience intuition is not just a hunch. It is based on experience, and past understanding. We can take our decision on the basis of intuition, if we have considerable experience in that sector
  9. 9. What is moving average method ? Here we take moving average of either 3 days or 5 days or 7 days and try to forecast using this moving average. We may also use smoothing to remove exceptional fluctuations Moving average is a case where data can be used to forecast on the basis of past trend
  10. 10. Example of moving average : Period data 3 year moving average 2001 300 2002 400 400 2003 500 434 2004 400 500 2005 600 600 2006 800 700 2007 700
  11. 11. What is smoothing ? Here we use the past data to smooth the data. Here we use the past data to predict the future
  12. 12. Time series or stockastic models Stockastic means where we are using time as an independent variable and predict demand using this variable.
  13. 13. What is a trend ? There are 4 components of trend : 1. secular trend 2. cyclical fluctuation 3. seasonal fluctuation 4. random / irregular variations
  14. 14. What is secular trend It is overall trend that continues for a long period of time. It is having long time perspective
  15. 15. What is cyclical fluctuation? It represents fluctuations due to economic cycles like boom, recession etc. These fluctuations last for a few years
  16. 16. What is seasonal variation ? It is due to seasonal components like summer, winter, monsoon, or some other such factors which have impact for a few months
  17. 17. What is random variation? These are beyong prediction they happen by chance
  18. 18. Causal / econometrics models These models use cause -effect relationship to predict demand. In these models, we try to estimate demand using an econometric models – here we try
  19. 19. What are the types of trends and cycles ? 1. linear trend = there is constant rate of change (it is a straight line) 2. parabolic trend = a varying rate of change 3. exponential / logarithmic trend = a constant % rateof change 4 S shape : slow initial growth, then fast growth and then again slow growth – showing S shape
  20. 20. What is autocorrelation ? Correlation of a variable with itself (with a time lag) is called auto (self) – correlation this can be used to identify the impact of seasonality. If Auto-correlation is zero, it denotes that data are random. If data has seasonality, there will be autocorrelation – which can be identified. We have to remove the component of autocorrelation to identify the trend line
  21. 21. Box Jenkins Model This model was developed in 1976. It can help you in demand forecasting. It uses two types of methods : 1 AR (auto regressive model ) 2. moving average method
  22. 22. contd... Data in a series are of two types : 1. stationary (fixed around mean) 2. non-stationary (data are not fixed around mean). Box Jenkins model convert non-stationary trend into stationary trend, thus prediction is possible.
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  36. 36. http://www.scribd.com/doc/6583303/Reasoning-Afterschoool
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  39. 39. THANKS.... GIVE YOUR SUGGESTIONS AND JOIN AFTERSCHOOOL NETWORK / START AFTERSCHOOOL SOCIAL ENTREPRENEURSHIP NETWORK IN YOUR CITY / CONDUCT WORKSHOP ON SOCIAL ENTREPRENEURSHIP IN YOUR COLLEGE / SCHOOL / CITY [email_address] JOIN OUR NETWORK TO PROMOTE SOCIAL ENTREPRENEURSHIP

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