DEFINITION

Demand

forecasting is the activity of estimating the quantity of a product or service that consumers will purchase.
It

is a process of estimating a future event by casting forward past data.

The

past data are systematically combined in a predetermined way to obtain the estimate of future demand.

PURPOSE OF DEMAND FORECASTING??

STEPS IN

DEMAND FORECASTING

Determine the use of the forecast

Select the items to be forecast Determine the time horizon of the forecast

Select the forecasting model(s)

Gather the data Make the forecast Validate and implement results.

LENGTH OF FORECAST:
Short-term

forecasts: involving a period up to twelve months.

Medium-term forecasts: involving a period from one to two years.

Long-term forecasts: involving a period of three to ten years

THE TIME HORIZON OF THE

FORECAST IS CLASSIFIED AS FOLLOWS:
Description Short-range Duration Usually less than 3 months, maximum of 1 year Forecast Horizon Medium-range 3 months to 3 years Long-range More than 3 years

Applicability

Job scheduling, Sales and worker production assignments planning, budgeting

New product development, facilities planning

HOW IS DEMAND FORECAST DETERMINED?

There are two approaches to determine demand forecast :(1)

Qualitative approach:

(1)

Quantitative approach:

Difference between Qualitative approach and Quantitative approach

Description Applicability Qualitative Approach Quantitative Approach Used when situation is Used when situation is vague & little data exist stable & historical data (e.g., new products and exist technologies) (e.g. existing products, current technology) Involves mathematical techniques

Considerations Involves intuition and experience Techniques

Jury of executive opinion Time series models

Sales force composite

Delphi method Consumer market survey

Causal models

QUALITATIVE FORECASTING METHODS:

Qualitative Method
Jury of executive opinion

Description
The opinions of a small group of high-level managers are pooled and together they estimate demand. The group uses their managerial experience, and in some cases, combines the results of statistical models. Each salesperson (for example for a territorial coverage) is asked to project their sales. Since the salesperson is the one closest to the marketplace, he has the capacity to know what the customer wants. These projections are then combined at the municipal, provincial and regional levels. A panel of experts is identified where an expert could be a decision maker, an ordinary employee, or an industry expert. Each of them will be asked individually for their estimate of the demand. An iterative process is conducted until the experts have reached a consensus. The customers are asked about their purchasing plans and their projected buying behavior. A large number of respondents is needed here to be able to generalize certain results.

Sales force composite

Delphi method

Consumer market survey

QUANTITATIVE FORECASTING METHODS

There are two quantitative forecasting models

(1) the time series model:

A time series is a s et of evenly spaced numerical data and is obtained by observing responses at regular time periods. In the time series model , the forecast is based only on past values and assumes that factors that influence the past, the present and the future sales of your products will continue. (2) the causal model: The causal model uses a mathematical technique known as the regression analysis that relates a dependent variable (for example, demand) to an independent variable (for example, price, advertisement, etc.) in the form of a linear equation.

THANK YOU!!!