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Demand forecasting

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Demand forecasting

  1. 1. PRESENTATION ON DEMAND FORECASTINGMADE BYKANIKA SINGHAL<br />
  2. 2. DEMAND FORECASTING<br />IT IS THE TECHNIQUE OF ESTIMATING THE DEMAND IN DISTANT FUTURE. IT IS IMPORTANT BASIS FOR FORMULATING INVENTORY POLICY,PRODUCTION POLICY,MARKETING POLICY BY A PRODUCTION UNIT.<br />
  3. 3. PURPOSE/NEED OF DEMAND FORECASTING<br />PURPOSE OF SHORT TERM FORECASTING: IT IS DIFFICULT TO DEFINE SHORT RUN FOR A FIRM BECAUSE ITS DURATION MAY DIFFER ACCORDING TO THE NATURE OF THE COMMODITY<br />PURPOSE OF LONG TERM FORECASTING: THE CONCEPT OF DEMAND FORECASTING IS MORE RELEVANT TO THE LONG RUN THAN THE SHORT RUN. LONG DURATION MAY GO UPTO 5 TO 10 YEARS.<br />
  4. 4. PURPOSE OF SHORT TERM FINANCING<br />MAIN PURPOSE OF SHORT TERM DEMAND FORECASTING<br />FOR EVOLVING APPROPRIATE PRODUCTION POLICY TO AVOID PROBLEMS OF OVER PRODUCTION UNDER PRODUCTION<br />PROPER MGNT. OF INVENTORIES I.E PURCHASING RAW MATERIAL AT APPROPRIATE TIME WHEN THERE PRICES ARE LOW ,& AVOIDING OVER STOCKING .<br />TO SETUP REASONABLE SALE TARGET .<br />
  5. 5. PURPOSE OF LONG TERM FINANCING<br />PLANNING FOR A NEW PROJECT, EXPANSION & MODERNISATION OF AN EXISTING UNIT &TECHNOLOGY UPGRADATION<br />ESTIMATION LONG TERM FINANCIAL NEEDS : IT TAKES TIME TO RAISRE FINANCIAL RESOURCES , MORE PARTICULARLY WHEN THE SIZE OF FINANCES NEEDED FOR EXPANSION , MODERNISATION<br />ARRANGING SUITABLE MANPOWER: IN THE LONG RUN ,TECHNIQUE OF PRODUCTION MAY CHANGE . TRAINED & SKILLED LABOUR &BUSINESS EXECUTIVES MAY BE NEEDED FOR THE NEW TYPE OF JOB RESPONSIBILITY <br />
  6. 6. METHODS OF DEMAND FORECASTING<br />OPINION POLLING METHOD<br />STATISTICAL METHOD<br />
  7. 7. A) OPINION POLLING METHOD<br />CONSUMER SURVEY METHOD<br />COLLECTIVE OPINION METHOD<br />EXPERTS OPINION METHOD<br />
  8. 8. A) OPINION POLL METHOD<br />IN THE OPINION POLL METHOD ,THE OPINION OF THE BUYERS ,SALES FORCE AND EXPERTS COULD BE SOUGHT TOP DETERMINE THE EMERGING TREND IN MARKET DEMAND .<br />
  9. 9. CONSUMER SURVEY METHOD<br />IN THIS METHOD, THE REPRESENTATIVES OF THE FIRM APPROACH BUYERS PERSONALLY TO KNOW THEIR VIEWS ABOUT A PARTICULAR PRODUCT AND THERE INTENTIONS FOR THE LIKELY PURCHASE AT A GIVEN PRICE IN THE FUTURE . <br />
  10. 10. TYPE OF CONSUMER SURVEY METHOD<br />THREE TYPES OF CONSUMER SURVEY METHOD ARE:<br />COMPLETE ENUMERATION<br />SAMPLE SURVEY METHOD<br />END USE<br />
  11. 11. 1) COMPLETE ENUMERATION<br />IN THE CASE OF COMPLETE ENUMERATION, FIRM HAS TO GO DOOR TO DOOR SURVEY CONTACTING ALL THE HOUSEHOLDS IN THE REGION . <br />THE MAJOR LIMITATION OF THIS METHOD IS THAT IT REQUIRES PLENTY OF RESOURCES,MANPOWER & TIME .<br />
  12. 12. 2) SAMPLE SURVEY METHOD<br />IN CASE OF SAMPLE SURVEY METHOD, SOME HOUSEHOLDS ARE SELECTED ON A RANDOM BASIS AS SAMPLES AND THEIR OPINION ARE TAKEN AS THE GENERALISED OPINION OF THE MARKET THEY BELONG TO . <br />
  13. 13. 3) END USE <br />IN THIS METHOD THE SALE OF THE PRODUCT UNDER CONSIDERATION IIS PROJECTED ON THE BASIS OF DEMAND SURVEY OF THE INDUSTRIES USING THIS PRODUCT AS AN INTERMEDIATE PRODUCTS . <br />
  14. 14. 2. COLLECTIVE OPINION METHOD <br />IN THIS METHOD INSTEAD OF CONSUMERS , THE OPINION OF THE SALESMEN WHO ARE IN CLOSE CONTACT WITH BUYERS IS SOUGHT . IT IS P[RESUMED THAT SALESMEN , BEING THE CLOSEST TO CUSTOMER , HAVE THE MOST ACCURATE INFORMATION ABOUT THEIR LIKING ,DISLIKING ,CONSUMPTION PATTERN AND CONSUMER REACTION TO THE FIRMS PRODUCT ETC .<br />
  15. 15. 3. EXPERT OPINION METHOD<br />INSTEAD OF DEPENDING UPON THE OPINION POLL OF BUYERS ,FIRMS CAN OBTAIN VIEWS OF THE SPECIALISTS OR EXPERTS . THIS IS ALSO KNOWN AS “DELPHI TECHNIQUE” OF INVESTIGATION . <br />
  16. 16. B) STATISTICAL METHOD<br />TREND PROJECTION METHOD<br />BAROMETRIC TECHNIQUE<br />REGRESSION METHOD<br />SIMULTANEOUS METHOD<br />
  17. 17. 1) TREND PROJECTION METHOD<br />OUTPUT & SALES OF A FIRM MATY INCRTEASE OR DECREASER OVER A PERIOD OF TIME . LONG RUN TENDENCY OF A TIME SERIEWS TO INCREASE OR DECREASE OVER A PERIOD OF TIME IS ALSO KNOWN AS TREND .<br />
  18. 18. <ul><li> TYPES OF TREND PROJECTION METHOD</li></ul>GRAPHIC METHOD<br />LEAST SQUARES <br />TIME SERIES ANALYSIS<br />
  19. 19. 1) GRAPHIC METHOD<br />THIS IS THE SIMPLE TECHNIQUE TO DETYERMINE THE TREND . ALL VALUES OF OUTPUT OR SALES FOR DIFFERENT YEARS ARE PLOTTED ON A GRAPH & A SMOOTH FREE HAND CURVE IS DRAWN PASSING THROUGH AS MANY POINT AS POSSIBLE .<br />
  20. 20. 2) LEAST SQUARE METHOD<br />THIS TECHNIQUE IS MOSTLY USED IN PRACTICE . IT IS A STATISTICAL METHOD . ITS HELP A TREND LINE FITTED TO THE DATA . THIS LINE IS ALSO KNOWN AS “THE LINE OF BEST FIT” . THIS SYSTEM OF FORECASTING DOES NOT EXPLAIN THE REASON FOR THE CHANGES .<br />
  21. 21. 3) TIME SERIES ANALYSIS<br />TIME SERIES IS COMPOSED OF TREND,SEASONAL FLUCTATIONS, CYCLICAL MOVEMENTS & IRREGULAR VARIATIONS . IF THE AVAILABLE DATA IS QUARTER WISE / MONTH WISE IT IS POSSIBLE TO IDENTIFY THBE SEASONAL EFFECT . AND IF THE DATA IS FOR THE SUFFICIENTLY FOR THE LONG PERIOD OF TIME , THE TREND AND CYCLICAL EFFECTS CAN ALSO BE FOUND OUT .<br />
  22. 22. 2) BAROMETRIC TECHNIQUES<br />IT IS BASED ON THE ASSUMPTION THAT RELATIONSHIP CAN EXIST AMONG VARIOUS ECONOMIC TIME SERIES . FOR E.G : INDUSTRIAL OVER PRODUCTION AND INDUSTRIAL LOAN PROVIDED BY COMMERCIAL BANK MOVE IN THE SAME DIRECTION .<br />
  23. 23. BAROMETRIC TECHNIQUE<br />LEADING , LAGGINS , & COINCIDENT INDICATORS<br />INDEX NUMBERS<br />
  24. 24. KINDS OF RELATIONSHIP<br />THERE ARE THREE KINDS OF RELATIONSHIP AMONG ECONOMIC TIME SERIES :<br />LEADING SERIES<br />COINCIDENT SERIES<br />LAGGING SERIES<br />
  25. 25. 3) REGRESSION METHOD<br />IT IS A STATISTICAL TECHNIQUE IS FREQUENTLY USED IN DEMAND FORECASTING . UNDER THIS METHOD ,RELATIONSHIP IS ESTABLISHED BETWEEN QUANTITY DEMANDED AND ONE OR MORE INDEPENT VARIABLE SUCH AS INCOME , PRICE OF RELATED GOOD, PRICE OF THE COMMODITY .<br />
  26. 26. CONTINUE………<br />IN REGRESSION A QUANTITATIVE RELATIONSHIP IS ESTABLISHED BETWEEN DEMAND WHICH IS A DEPENDENT VARIABLE AND THE INDEPENDENT VARIABLE I.E DETERMINANT OF DEMAND .<br />
  27. 27. THANK U <br />

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