DEMAND FORECASTING

Demand Forecasting

Is to predicate the future situations of business Why necessary ?

To minimise risk & uncertainty in business

INTRODUCTION

Forecasting by Ford Motor

Web-based car configurator (build your car configurator) Predict demand for certain cars and features

When compared with actual sales

Techniques of Demand Forecasting

1.Qualitative Method

2.Quantitative Method

Qualitative Method

Obtain Information about the likes & dislike of Consumer.

Suited for Short term Demand Forecasting.

Demand Forecasts for new products can be made only by Qualitative Techniques.

Expert Opinion Method

1. Panel Consensus : If the Forecasting is based on the opinion of several Experts,

then it is known as Panel Consensus.

This kind of Forecasting minimize Individual deviations & Personal biases.

2. Delphi Method :

In this method seeks the opinion of groups of Expert through mail about the expected level of Demand

Consumer Survey Method

This method is based on a complete Survey of all the consumers for the commodity under consideration.

Interview or Questionnaires are used.

1.Consumer Sample Survey:

Only few Customers Selected & their views Collected.

Advantages :

Short Term ProjectionsDoes Not Cost MuchWork QuicklyGives Excellent Results, if used carefully.

2. Consumers End Use Survey : This method Focuses on Forecasting the demand for

intermediary Goods.

Under this method, the sales of a Product are projected through a survey of its end users.

3. Complete Enumeration Method :

In this method records the data & aggregates of consumers

If the data is wrongly recorded than Demand Forecasting going wrong, than this method will be totally useless.

SURVEYBANK NAMES RATE FOR

SAVINGBANK

ACCOUNTS

Kotak Mahindra Bank 6%

ICICI Bank 4.5%

HDFC Bank 4%

State Bank of India 4%

Quantitative method(statistical Method)

1. Time series analysis. It is used to estimate future demand. This method is based on obtaining the historical data regarding the

demand for the product , so as project future occurrences. The data obtained are chronologically arranged. Based on the data plotted on the graph , a line or curve is drawn.

The time series data would indicate different types of fluctuations which can be classified as

Secular Trend :- Long run increase or decrease in the series. Cyclical Variations :-The rhythmic variations in the economic series. Seasonal Variations :- The variations caused by weather patterns social

habits such as festivals etc. Random Fluctuations :- The irregular and unpredictable shocks to the

system, such as war, nature catastrophes etc.

When forecast is to be made the seasonal, cyclical, random variations are eliminated from the collected data leaving behind the secular trend only.

2. Moving Average. The method of moving average is useful when the market demand is

assumed to remain fairly steady over time.

Moving Average =Demand in the previous n month n

3. Exponential smoothing. In this techniques more recent data are given more weightage.

This is based on the argument that the more recent the observations , the more its impact on future ,therefore it is given more weightage.

4. Index Numbers :- The Index no. offers a device to measures changes in a group of related

variable over a period of time.

In Index no. base year is given the value of 100 and then expenses all subsequent changes as a movement of this no's .

The most commonly used is the laspeyes Price Index.

5.5. Regression Analysis. Regression Analysis. This method is undertake to measure the relationship between two

variables where correlation appears to exist. E.g. The age of the air condition machine and the annual repair

expenses. This method is purely based on the statistical data.statistical data.

6.6. Econometric Model.Econometric Model. The econometric model is used to express the most probable

interrelationship between a set of economic variables according to economic theory and statistical analysis.

Being analytical in nature and process oriented in approach they throw more light on problems of a theoretical and statistical nature.

LimitationsLimitations The assumption that the relationship established in the past

will continue to prevail in the future.

7. Input-Output Analysis.

The Input-output forecasting is based on a set of table that explain the inter-relationship among the various components of the economy.

E.g. CarCar , Increase or Decrease in the demand of car lead to increase in the production and also affects its other products.

CRITERIA FOR DEMAND FORECASTING  1.ACCURACY 2.PLASIBILITY 3.SIMPLICITY

4.DURABILITY 5.FLIXIBILITY 6.AVAILIABILITY OF DATA 7.ECONOMY 8.QUICKNESS 

Thank you