Demand forecasting techniques ppt


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Demand forecasting techniques ppt

  1. 1. Demand Forecasting Techniques <br />
  2. 2. DEMAND FORECASTING<br />An activity of determining qty. of goods to be purchased in Future<br />Necessity for forecasting Demand<br />Stock Effects<br />Market Response effects<br />Factors affecting Demand forecast<br />
  3. 3. Factors involved in Demand Forecasting<br />How far ahead?<br />a. Long term – eg., petroleum, paper, shipping. Tactical decisions. Within the limits of resources already available.<br />b. Short-term – eg., clothes. Strategic decisions. Extending or reducing the limits of resources.<br />2.Undertaken at three levels:<br />Macro-level<br />Industry level eg., trade associations<br />Firm level<br />3. Should the forecast be general or specific (product-wise)?<br />4. Problems or methods of forecasting for “new” vis-à-vis “well established” products.<br />5. Classification of products – producer goods, consumer durables, consumer goods, services.<br />6. Special factors peculiar to the product and the market – risk and uncertainty. (eg., ladies’ dresses)<br />
  4. 4. Short Term forecast<br />Scheduling of production to avoid problems of over production and under- production.<br />Proper management of inventories<br />Evolving suitable price strategy to maintain consistent sales<br />Formulating a suitable sales strategy in accordance with the changing pattern of demand and extent of competition among the firms.<br />Forecasting financial requirements for the short period.<br />
  5. 5. Long Term Forecast<br />Planning for a new project, expansion and modernization of an existing unit, diversification and technological up gradation.<br />Assessing long term financial needs. It takes time to raise financial resources.<br />Arranging suitable manpower. It can help a firm to arrange for specialized labour force and personnel.<br />Evolving a suitable strategy for changing pattern of consumption.<br />
  6. 6. Determinants of Demand<br />1. Non-durable consumer goods:<br />Purchasing power – disposable personal income (personal income – direct taxes and other deductions). Published by C.S.O.<br />Price.<br />Demography:<br />2. Durable consumer goods:<br />Choice between using the goods longer by repairing it, or<br />disposing it off and replacing it with a new one. <br /> Require special facilities for their use, eg., roads for automobiles.<br /> Household demand vis-à-vis individual demand.<br /> Family characteristics.<br /> Total demand consists of a. New-owner demand and, b. Replacement demand<br /> Price and credit conditions.<br />
  7. 7. Determinants of Demand<br />3. Capital goods: – used for further production. Demand will depend upon the specific markets they serve and the end uses for which they are bought.<br />Data required for estimating the demand for capital goods:<br />The growth prospects of the user industries.<br />The norm of consumption of capital goods per unit of installed capacity.<br />The velocity of their use.<br />
  8. 8. Methods of Demand Forecasting <br />Qualitative Methods<br />Unaided Judgements/ Expert Opinion/ Hunch Method<br />Collective Opinion<br />Perdiction Markets<br />Delphi Technique<br />JudgementalBootstraping<br />Simulated Interactions<br />Conjoint analysis<br />Test marketing<br />
  9. 9. Test marketing<br />Buyers’ Intentions<br />Consumer Clinics<br />Neuro Science<br />Market Experiments<br />Virtual shopping and virtual Management<br />
  10. 10. Quantitative Methods<br />Time Series<br />Moving averages<br />Leading Indicator method<br />Correlation and regression Equations<br />Extrapolation<br />