Demand forecasting.
- 1. Types & Significance of Demand ForecastingBy-ShubhamSinghalSaurabhTripathi
- 2. Demand Forecasting? Demand + Forecasting
- 3. Acc. to Benham”The demand for anything at a given price, is the amount of it which will be bought per unit of a time at that price.”
- 4. Forecasting stand for estimating or prediction.
- 5. Demand Forecasting refers to the prediction or estimation of a future situation under given constraints.Examples-Demand Forecasting for- 1) Sufficient food for estimated no. of Guests in a party. 2) Adequate no. of goods required by customers in a particular time period. 3) In Industries, for estimation of raw materials required. 4) For prediction of the services(manpower) required for production.
- 6. Types of Demand Forecasting1)Short Time Forecast-: Are prepared for one year & reviewed monthly or half yearly.
- 7. Used for marketing activities such as selling or advertising.2) Long Time Forecast-: For long term planning, like investment decision for a new unit or during expansion of existing unit.
- 8. Though they help in planning, the margin of error is higher.Techniques for demand forecasting1) Analytical Methods-:a) User Expectation method-:It depends upon the survey of buyers intention.
- 9. The survey of buyers will provide:
- 11. Total likely consumption of Product. MeritsDemerits1) It comes directly from 1) Customers may misjudge. customers. 2) It is easy & inexpensive. 2) Consumers may get confuse due various alternatives.
- 12. b) Collective Opinion method-:It depends upon the collective opinion of sales man of a particular product in different territories.
- 13. Under this method, the salesmen have to report to the head office, their estimates of expectations of sales in their territories.
- 14. Also referred to as “Hunch Method "of Forecasting.E.g. Information obtained from retailers and wholesalers.
- 15. c) Experts Opinion Method-: Steps involved-:
- 16. Views of Experts in their respective fields are taken.
- 17. These opinions are then exchanged among various experts of same fields.
- 18. Forecast is achieved by averaging these opinions.
- 19. Advantage-:
- 20. Depends upon experts research & analysis, so it is reliable as well.
- 21. No danger of “ group think” mentality.2)Statistical Methods-: a) Trend Projection Methodb)Graphical Method c) Least Square Method d) Regression Analysis MethodStatistical techniques are used to maintain the objectivity as well as precision in Demand Forecasting.a) Trend Projection Method-:In this method, previous data's on a product considering its sales are chronologically arranged
- 22. This arrangement is called “Time Series”.
- 23. This time series represents the effective demand for a particular product .
- 24. Merits-:It does not require the formal knowledge of economic theory and the market, it only needs the time series data.Demerits-: It assumes that the past is repeated in future. Also, it is an appropriate method for long-run forecasts, but inappropriate for short-run forecasts.
- 25. Trend Projection can be either done-:
- 26. Graphically or,
- 27. Statistically. 1) Graphically-: Lets take e.g of sales of a company in last 3 years. Now, using these data's we can predictthe sale for year 2008.
- 28. Graph of sales of the company using Trend Projection method.
- 29. Statistically,Constant Rate of Change= “ Y=mx+c”Here, Y= Sales by the company, m= Slope, x= Time Period, c= Intercept.
- 30. Significance of Demand Forecasting It provides appropriate production scheduling so as to avoid the problem of over-production & problem of short supply.
- 31. Helping the firms to reduce the cost for purchasing raw material.
- 32. Setting sales targets, establishing sales controls & incentives.
- 33. Manufacturers prefer “Make to Stock” rather than “Make to Order". Demand Forecasting helps to plan ahead and provide the finished goods to their customers as soon as possible. Thank You!!!