- Demand forecasting predicting future demand for the product.
- In other words, it refers to the prediction of probable demand for a product or a service on the basis of the past events and normal trends in the present.
Characteristics of Demand Forecasting
- Various important plants are prepared on the basis of forecasts. In case of wrong forecasting, the business may be in trouble and suffer heavy losses. Hence it is necessary to have such forecasting system which amounts to maximum accuracy.
- Forecasting method should be as simple as possible. If it is difficult or technical then the person, who engaged in forecasting job, will not do his job properly and there will chances always for the mistake. Also, Some information’s may also require being collected from outsiders. Moreover, If this method complex or difficult then they may not able to reply reasonably and accurately.
- Moreover, The objects and scope of forecasting should as such as the relevant information collected immediately with reasonable accuracy.
- The data of forecasting must such wherein the future changes are expected to a minimum and are reliable for planning.
- Also, Costs must weigh against the importance of the forecast to the operations of the business.
- The forecasting techniques must easily understandable and reliable to the management.
- The forecaster has to deal with various components which are independent. Moreover, If he does not make an adjustment in one component to bring it in line with a forecast of another, he would achieve a whole which would appear consistent.
Methods of forecasting
There are two approaches to demand to forecast
- Survey methods
- Statistical methods
- Experts’ Opinion Poll
- Delphi Method
- Market Experiment Method
- Trend Projection Method
- Barometric Method
- Econometric Methods
- Other Statistical Measures