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.