Predicting or estimating the future demand for a product Undertaken for the purpose of planning and decision making

Business Decision Making Forward Planning and Scheduling Acquiring Inputs Making provision for finance Formulating pricing strategy Planning advertisement

Purposes of forecasting Length of forecasts levels:

Macro-level Industry level Firm level

general or specific (product- wise)? New or well established products.

Type of product
Producer goods Consumer goods Consumer durables Services

Short Term (0 to 3 months): for inventory management and scheduling. Medium Term (3 months to 2 years): for production planning, purchasing, and distribution. Long Term (2 years and more): for capacity planning, facility location, and strategic planning.

Specifying the Objective Determining the time Perspective Determining the type of good Selecting a proper method of forecasting Collection of data Interpretation of results

Clarity Mention assumptions, methodology and sources. Avoid using vague generalities. Give the possible margin of error. Make use of charts and graphs for easy comprehension.

Simplicity and ease of comprehension. Accuracy

degree of deviations between forecasts and actuals the extent of success in forecasting directional changes.

Economy (cost) Maintenance of timeliness.

Methods of Demand Forecasting

Survey Methods

Statistical Methods

Consumer Survey Methods

Complete Enumeration Method Sample Survey Method End Use Method

Opinion Methods
Experts Opinion Method Test Marketing Method Delphi Method

Trend Analysis Time Series Regression