2. What is demand Forecasting ?
“PREDICTIONS ARE USUALLY
DIFFICULT, ESPECIALLY ABOUT THE FUTURE”
Prediction or estimation of a future situation, under
given conditions.
Classified into categories: (i) Passive forecasts
(ii)Active forecasts
Important aid in effective and efficient planning
It is backbone of any business
3. Importance of demand
forecasting
Crucial to supplier, manufacturer or retailer
Business decisions
Planning for future finished goods
accurate demand forecasts lead to efficient operations
and high levels of customer service
Improve quality & effectiveness of product
4. Levels of Demand Forecasting
1) Micro Level- Demand forecasting by individuals
business firm for forecasting the demand for its
product.
2) Industrial Level- Demand estimate for the product of
the industry
3) Macro Level- Aggregate demand forecasting for
industrial output at the national level- it is based on
the national income/ aggregate expenditure of the
company.
6. Factors determining demand
forecasting
Time factor
Level of forecasting
General or Specific forecasting
Problems & methods of forecasting
Classification of goods
Knowledge of different market conditions
Other factors
8. Qualitative Forecasting approach
I. Judgmental approach
Surveys
Consensus methods
Delphi method
II. Experimental approach
Test marketing
Customer buying database
Customer panels
9. Advantages & Disadvantages of
Qualitative Forecasting
Advantages :-
o Ability to predict changes
o Flexibility
o Ambiguity
Disadvantages :-
o Accurate forecast is not possible
o Judgmental approach
o False/ inadequate information
10. Quantitative Forecasting Approach
Relationship approach
Econometric models
Life cycle models
Input-output models
Time series approach
Static models
Adaptive models
11. Forecasting Examples
Examples from Projects:
Demand for tellers in a bank;
Traffic flow at a major junction
Pre-poll opinion survey amongst voters
Demand for automobiles or consumer durables
Segmented demand for varying food types in a restaurant
Area demand for frozen foods within a locality
Example from Retail Industry: American Hospital Supply Corp.
70,000 items;
25 stocking locations;
Store 3 years of data (63 million data points);
Update forecasts monthly;
21 million forecast updates per year.