GROUP 8

FORECASTING
 CLAVO, JOHN HENRICH M.
DIMACULANGAN, JONATHAN B.
GIBO, JOHN PAUL M.
MANIBO, KRISTEL MAE M.
FORECASTING IS A PROCESS OF
MAKING PREDICTIONS OR
ESTIMATES ABOUT FUTURE
EVENTS, TRENDS, OR OUTCOMES
BASED ON HISTORICAL DATA,
ANALYSIS, AND VARIOUS
FORECASTING METHODS.
 IT'S COMMONLY USED IN
BUSINESS, ECONOMICS,
WEATHER, AND MANY OTHER
FIELDS TO HELP ORGANIZATIONS
AND INDIVIDUALS MAKE
INFORMED DECISIONS ABOUT THE
FUTURE.
 DIFFERENT METHODS, SUCH AS
STATISTICAL MODELING, TIME
SERIES ANALYSIS, AND MACHINE
LEARNING, CAN BE EMPLOYED
FOR FORECASTING DEPENDING ON
THE SPECIFIC CONTEXT AND DATA
AVAILABLE.
 THE GOAL IS TO REDUCE
UNCERTAINTY AND IMPROVE
PLANNING BY PROVIDING
INSIGHT INTO WHAT MIGHT
HAPPEN IN THE FUTURE.
 FORECASTING INVOLVES
PREDICTING FUTURE EVENTS OR
TRENDS BASED ON HISTORICAL
DATA AND ANALYSIS.
IT'S A VALUABLE TOOL FOR BUSINESSES,
GOVERNMENTS, AND INDIVIDUALS TO
MAKE INFORMED DECISIONS AND PLANS.
THERE ARE VARIOUS TYPES OF
FORECASTING, INCLUDING FINANCIAL
FORECASTING, WEATHER FORECASTING,
SALES FORECASTING, AND DEMAND
FORECASTING, EACH TAILORED TO
ADDRESS SPECIFIC NEEDS AND
CONTEXTS.
 ACCURATE FORECASTING CAN
LEAD TO BETTER RESOURCE
ALLOCATION, RISK MANAGEMENT,
AND OVERALL DECISION-MAKING.
 DEMAND
MANAGEMENT IN
FORECASTING
Demand management in
forecasting refers to the process
of planning and controlling an
organization's demand for
products or services. It involves
understanding and predicting
customer demand, and then using
various strategies to meet that
demand efficiently.
 DEMAND MANAGEMENT TYPICALLY INCLUDES:

FORECASTING: USING HISTORICAL DATA AND STATISTICAL

METHODS TO PREDICT FUTURE DEMAND FOR PRODUCTS OR
SERVICES.

INVENTORY MANAGEMENT: ENSURING THAT SUFFICIENT STOCK

OR INVENTORY IS AVAILABLE TO MEET CUSTOMER DEMAND
WITHOUT EXCESSIVE OVERSTOCKING, WHICH CAN BE COSTLY.

MARKETING AND PROMOTION: USING MARKETING STRATEGIES

TO INFLUENCE AND SHAPE CUSTOMER DEMAND, SUCH AS
ADVERTISING OR PROMOTIONS.

PRICING STRATEGIES: ADJUSTING PRICES TO MANAGE DEMAND,

SUCH AS DISCOUNTING PRODUCTS TO INCREASE SALES DURING
SLOW PERIODS.
SUPPLY CHAIN MANAGEMENT: ENSURING THAT THE SUPPLY
CHAIN IS FLEXIBLE AND RESPONSIVE TO CHANGES IN DEMAND,
SO PRODUCTS OR SERVICES CAN BE DELIVERED WHEN AND
WHERE THEY ARE NEEDED

OVERALL, DEMAND MANAGEMENT AIMS TO ALIGN

AN ORGANIZATION'S RESOURCES, PRODUCTION,
AND DISTRIBUTION WITH CUSTOMER DEMAND
PATTERNS TO OPTIMIZE OPERATIONAL
EFFICIENCY AND CUSTOMER SATISFACTION.
DEMAND FORECASTING IS A
CRITICAL PROCESS IN
BUSINESS AND SUPPLY
CHAIN MANAGEMENT THAT
INVOLVES PREDICTING
FUTURE CUSTOMER DEMAND
FOR A PRODUCT OR
SERVICE. IT SERVES AS A
FOUNDATIONAL ELEMENT FOR
VARIOUS BUSINESS
DECISIONS, INCLUDING
PRODUCTION PLANNING,
INVENTORY MANAGEMENT,
AND RESOURCE ALLOCATION.
 HERE ARE SOME KEY POINTS ABOUT DEMAND FORECASTING:

DATA ANALYSIS: DEMAND FORECASTING RELIES ON HISTORICAL SALES

DATA, MARKET TRENDS, ECONOMIC INDICATORS, AND OTHER RELEVANT
INFORMATION TO MAKE PREDICTIONS.

TYPES OF FORECASTING: THERE ARE DIFFERENT METHODS OF DEMAND

FORECASTING, INCLUDING QUALITATIVE METHODS (BASED ON EXPERT
JUDGMENT), QUANTITATIVE METHODS (STATISTICAL MODELS), AND A
COMBINATION OF BOTH.

SHORT-TERM VS. LONG-TERM: FORECASTS CAN BE SHORT-TERM (DAYS,

WEEKS, OR MONTHS) OR LONG-TERM (YEARS). SHORT-TERM FORECASTS
ARE MORE ACCURATE BUT ARE LIMITED IN SCOPE, WHILE LONG-TERM
FORECASTS ARE LESS PRECISE BUT PROVIDE STRATEGIC INSIGHTS.
 DEMAND PATTERNS: FORECASTS CONSIDER DIFFERENT DEMAND
PATTERNS, SUCH AS SEASONAL FLUCTUATIONS, TREND ANALYSIS, AND
CYCLICAL VARIATIONS.

APPLICATIONS: DEMAND FORECASTING IS USED FOR INVENTORY

MANAGEMENT, PRODUCTION SCHEDULING, WORKFORCE PLANNING, AND
BUDGETING.

RISK AND UNCERTAINTY: FORECASTS ARE SUBJECT TO UNCERTAINTY,

AND FACTORS LIKE UNFORESEEN EVENTS, CHANGING CUSTOMER
PREFERENCES, AND MARKET DISRUPTIONS CAN IMPACT THEIR ACCURACY.

CONTINUOUS MONITORING: DEMAND FORECASTS SHOULD BE

REGULARLY UPDATED AND REFINED TO REFLECT CHANGING MARKET
CONDITIONS.
ACCURATE DEMAND FORECASTING
CAN HELP BUSINESSES OPTIMIZE
THEIR OPERATIONS, REDUCE
COSTS, AND MEET CUSTOMER
EXPECTATIONS EFFECTIVELY. IT'S
A CRUCIAL TOOL FOR SUPPLY
CHAIN EFFICIENCY AND OVERALL
BUSINESS SUCCESS.
The characteristics of
demand refer to the various
factors and attributes that
describe how customers
behave and make purchasing
decisions in relation to a
product or service. These
characteristics play a
significant role in
understanding and managing
demand effectively.
 HERE ARE SOME KEY CHARACTERISTICS OF DEMAND:

PRICE SENSITIVITY: CUSTOMERS OFTEN EXHIBIT VARYING

DEGREES OF SENSITIVITY TO PRICE CHANGES. UNDERSTANDING HOW
CHANGES IN PRICE IMPACT DEMAND IS ESSENTIAL FOR PRICING
STRATEGIES.

INCOME ELASTICITY: DEMAND CAN BE INFLUENCED BY CHANGES IN

CONSUMER INCOME. SOME GOODS ARE CONSIDERED NORMAL GOODS,
WHERE DEMAND RISES WITH INCREASED INCOME, WHILE OTHERS
ARE INFERIOR GOODS, WHERE DEMAND FALLS AS INCOME RISES.

SUBSTITUTABILITY: THE AVAILABILITY OF SUBSTITUTE PRODUCTS

OR SERVICES CAN GREATLY AFFECT DEMAND. IF SUITABLE
ALTERNATIVES EXIST, CUSTOMERS MAY SWITCH IF PRICES OR
QUALITY CHANGE.
COMPLEMENTARY GOODS: CERTAIN GOODS ARE CONSUMED TOGETHER,
SO CHANGES IN THE DEMAND FOR ONE CAN IMPACT THE DEMAND FOR
ANOTHER. FOR EXAMPLE, THE DEMAND FOR COFFEE AND CREAM MAY BE
INTERRELATED.

SEASONALITY: MANY PRODUCTS OR SERVICES HAVE SEASONAL DEMAND

PATTERNS, SUCH AS INCREASED DEMAND FOR WINTER COATS IN COLDER
MONTHS. UNDERSTANDING THESE PATTERNS HELPS WITH INVENTORY AND
PRODUCTION PLANNING.

CONSUMER PREFERENCES: INDIVIDUAL PREFERENCES, TASTES, AND

TRENDS INFLUENCE DEMAND. BUSINESSES NEED TO ADAPT TO CHANGING
CONSUMER PREFERENCES TO STAY COMPETITIVE.

DEMOGRAPHICS: FACTORS LIKE AGE, GENDER, LOCATION, AND

CULTURAL BACKGROUND CAN AFFECT WHAT CUSTOMERS DEMAND.
DEMOGRAPHIC SHIFTS CAN LEAD TO CHANGES IN DEMAND FOR CERTAIN
PRODUCTS OR SERVICES.
LOYALTY AND BRAND EQUITY: STRONG BRAND LOYALTY CAN LEAD TO
RELATIVELY STABLE DEMAND, EVEN IN THE FACE OF PRICE CHANGES OR
COMPETITIVE OFFERING.

URGENCY AND NECESSITY: SOME PRODUCTS ARE CONSIDERED

ESSENTIAL AND HAVE INELASTIC DEMAND, MEANING CUSTOMERS WILL
CONTINUE TO BUY THEM REGARDLESS OF PRICE CHANGES. OTHERS ARE
MORE DISCRETIONARY AND HAVE ELASTIC DEMAND.

EXTERNAL FACTORS: ECONOMIC CONDITIONS, GOVERNMENT

REGULATIONS, AND GLOBAL EVENTS (E.G., PANDEMICS) CAN ALL IMPACT
DEMAND SIGNIFICANTLY.

CONSUMER BEHAVIOR: FACTORS LIKE BUYING HABITS, ONLINE

SHOPPING PREFERENCES, AND IMPULSE BUYING CAN AFFECT HOW AND
WHEN CUSTOMERS MAKE PURCHASES.
WORD OF MOUTH AND REVIEWS: POSITIVE OR NEGATIVE WORD-OF-
MOUTH AND ONLINE REVIEWS CAN HAVE A SUBSTANTIAL IMPACT ON
DEMAND FOR A PRODUCT OR SERVICE.

UNDERSTANDING THESE CHARACTERISTICS OF

DEMAND IS CRUCIAL FOR BUSINESSES TO MAKE
INFORMED DECISIONS REGARDING PRICING,
MARKETING, INVENTORY MANAGEMENT, AND
OVERALL BUSINESS STRATEGY. IT ALLOWS THEM
TO ADAPT TO CHANGING MARKET CONDITIONS
AND CONSUMER BEHAVIOR EFFECTIVELY.
THE PRINCIPLES OF
FORECASTING
INVOLVE USING DATA,
STATISTICAL
METHODS, AND
EXPERT JUDGMENT TO
MAKE PREDICTIONS
ABOUT FUTURE
EVENTS OR TRENDS.
HERE ARE SOME KEY
PRINCIPLES:
 DATA ANALYSIS: BEGIN BY COLLECTING AND ANALYZING RELEVANT
HISTORICAL DATA. THE QUALITY AND QUANTITY OF DATA ARE CRUCIAL
FOR ACCURATE FORECASTING.

TIME HORIZON: DEFINE THE TIME FRAME FOR YOUR FORECAST, WHETHER
IT'S SHORT-TERM, MEDIUM-TERM, OR LONG-TERM. THE CHOICE DEPENDS
ON THE SPECIFIC SITUATION.

FORECASTING METHODS: SELECT APPROPRIATE FORECASTING METHODS

BASED ON THE NATURE OF THE DATA AND THE PROBLEM. COMMON
METHODS INCLUDE TIME SERIES ANALYSIS, REGRESSION ANALYSIS, AND
QUALITATIVE TECHNIQUES.

ASSUMPTIONS: CLEARLY STATE THE ASSUMPTIONS UNDERLYING YOUR

FORECAST. THIS HELPS IN UNDERSTANDING THE LIMITATIONS AND
POTENTIAL BIASES IN THE PREDICTIONS.
 ACCURACY VS. PRECISION: RECOGNIZE THE TRADE-OFF BETWEEN
ACCURACY AND PRECISION. A HIGHLY ACCURATE FORECAST MAY NOT
ALWAYS BE PRECISE, AND VICE VERSA.

CONTINUOUS MONITORING: CONTINUOUSLY MONITOR THE ACCURACY

OF YOUR FORECASTS AND UPDATE THEM AS NEW DATA BECOMES
AVAILABLE. FORECASTS ARE NOT STATIC AND SHOULD ADAPT TO
CHANGING CONDITIONS.

EXPERT JUDGMENT: IN SOME CASES, EXPERT JUDGMENT IS ESSENTIAL,

ESPECIALLY WHEN DEALING WITH COMPLEX OR NOVEL SITUATIONS
WHERE HISTORICAL DATA MAY NOT BE SUFFICIENT.

COMMUNICATION: EFFECTIVELY COMMUNICATE THE RESULTS OF YOUR

FORECASTS TO STAKEHOLDERS, MAKING THEM AWARE OF THE
ASSUMPTIONS, UNCERTAINTIES, AND POTENTIAL RISKS ASSOCIATED WITH
THE PREDICTIONS
 FEEDBACK LOOP: ESTABLISH A FEEDBACK LOOP TO LEARN FROM THE
ACCURACY OF PAST FORECASTS AND IMPROVE FUTURE FORECASTING
PROCESSES.

SENSITIVITY ANALYSIS: ASSESS HOW CHANGES IN INPUT VARIABLES OR

ASSUMPTIONS IMPACT THE FORECAST TO UNDERSTAND THE RANGE OF
POSSIBLE OUTCOMES.

BIAS MITIGATION: BE AWARE OF POTENTIAL BIASES IN DATA AND

MODELING TECHNIQUES, AND TAKE STEPS TO MINIMIZE THEM.

DOCUMENTATION: DOCUMENT YOUR FORECASTING PROCESS

THOROUGHLY, INCLUDING DATA SOURCES, METHODS, ASSUMPTIONS, AND
RESULTS. THIS HELPS MAINTAIN TRANSPARENCY AND ACCOUNTABILITY.
REMEMBER THAT FORECASTING IS BOTH
A SCIENCE AND AN ART, AND THE
CHOICE OF PRINCIPLES AND METHODS
CAN VARY DEPENDING ON THE SPECIFIC
CONTEXT AND GOALS OF THE FORECAST.