DEMAND FORECASTING

In the modern competitive environment, an organization must have some idea about the demand for its product. It decides how a company can use its scarce resources Demand forecasting helps managers to solve the problems to a large extent

How it helps
it helps managers to predict the demand and to come up with a proper production mix. Demand forecasting for a particular product or portfolio of products for a company in a given in a micro aspects of the forecasting process. Macroeconomics forecasting the economics as aggregate such as inflation,unemployment,GDP growth,short term interest rate and trade flows.

Relevant Information
Demand forecasting required relevant in formations at the right time. This can be divided two different techniques.

Mercedes Benz case studies

TYPES OF DEMAND FORECASTING

QUALITATIVE Techniques QUANTIATIVE Techniques

QUALITATIVE TECHNIQUES
Expert opinion Survey Market Experiments

Quantitative Techniques
Time series Analysis Barometric Analysis

Expert opinion
It is other known as consensus method It is widely used This method utilizes the finding of market research and opinion of management executives, consultants, trade association officials, trade journal editors and sector analysis They follow DELPHI METHOD Delphi method means opinion of number of experts is gather individually. An analyst combines these forecasts using same weighting system and passes on the combined to forecasters. The forecasters make new round of forecasts with this information. The process continues till an overall consensus is arrived at from all panel members The Delphi method is primarily used to forecast the demand for new products. Disadvantages is only that experts may charges high fee.

Survey
Survey can be carried out through mail, email, telephone or directly speaking to respondents Email and phone survey are conducted for prospective customers who are not using a particular product or service of a company. Telephone survey are done by selecting telephone numbers from telephone directory.

Market experiment method

Market experiment is superior than survey method It is two type-TEST MARKETING and CONTROLLED EXPERIMENT

TEST MARKETING
A test area is selected Test area may be several cities and towns or particular region of a country or a sample of consumers By introducing the new product in a test area consumers response about the product can be judged.

CONTROLLED EXPERIMENTS
Test the demand for new product launch or test the demand for new brands of a product Sample consumers are selected They are requested to visit the store of that firm where various varieties brands of the product are kept for sale. They are asked which and how much of each brand of that product they would like to buy at different prices. Their preferences are recorded Selected consumers are provided a fixed money and allowed to make purchased of different variety of product by them is recorded. They also requested a fill a questionnaire asking reason for choices they have made. Variety may be changed and the experiment is repeated

TIME SERIES ANALYSIS

The most common method Past sales and demand are taken into consideration It divides into four categories = Trends. Seasonal variation, cyclical variations , Random fluctuations

TYPES
A trend is a long term increase or decrease in variable Seasonal variation takes into account the variations in demand during different seasons like sale of cotton dress in summer . Cyclical variation the variations in demand due to fluctuation in business cycle like recovery,prosperity, recession and depression Random fluctuation may happen due to natural calamities like flood ,earthquake,etc which can not predicted accurately.

BAROMETRIC ANALYSIS
Prediction of turning point in one economic time series through of observations on another time series called the barometer or indicator. In barometrics analysis the economic time series are diveded into three groups. Leading indicators, Coincident indicators Lagging indicators

Leading Indicators
It compares the existing data available. The growing number of senior citizens is a leading series for the demand for for the aged. Leading indicators index included such things as averages weekly hours worked and claims for unemployment insurances,manufactures of new products,stock prices,index of consumer expectation

COMPOSITE OF LEADIND INDICATORS

It is useful in understanding in the business cycle. CLL is intendrd to identify changes in the direction of the economy. Components ofindex of coincident Indicators are employes on nonagriculyuteal payrolls,industrial production,personal income minos trassfer payments, manufacturaing and trade sales

LAGGING INDICATOR COMPOSITE

It includes changes in labor cost per unit,ratio of inventory to sales and figure on installments credit and loans.