Demand forecasting is the process of using predictive analysis of historical data to estimate and predict customers' future demand for a product or service

1. Demand Forecasting

2. Demand Forecasting
• Estimation of a future event based on present and
past data.

3. Need of Demand Forecasting
• New Facility Planning
• Production Planning
• Workforce Scheduling
• Financial Planning

4. Need of Demand Forecasting
• New Facility Planning
⚬ Designing and building a new facility (factory0 or
designing and implementing a new production
process may take as long as five years even more.

5. Need of Demand Forecasting
• Production Planning
⚬ The rate of producing the products must be
matched with the demand which may be
fluctuating over the time period in the future.

6. Need of Demand Forecasting
• Workforce Scheduling
⚬ The forecasts of monthly demand may further be
broken down to weekly demands and the
workforce may have to be adjusted to meet these
weekly demands.

7. Need of Demand Forecasting
• Financial Planning
⚬ Sales forecasts are the driving force in budgeting,
sales forecasts provide the timing of cash inflows
and also provides a basis for budgeting the
requirements of cash outflow for purchasing
materials, payment to employees and to meet
other expenses of power and utilities etc.

8. Forecasting Time Horizon
• 3 Categories of Forecasts
⚬ Short Range Forecast
⚬ Medium Range Forecast
⚬ Long Range Forecast

9. Types of Forecasts
• 3 Types of Forecasts
⚬ Technological Forecasts
⚬ Economic Forecasts
⚬ Demand Forecasts

10. Types of Forecasts
• Technological Forecasts
⚬ Concerned with rates of technological progress
• Economic Forecasts
⚬ Statement of expected future business condition.
• Demand Forecasts
⚬ Projection of demand for a compnay's products or
services throughout some future period.

11. Steps in the Forecasting Process
• Decide Forecasting Objective
• Select the items for which forecasts are needed
• Determine the time horizon for the forecast
• Select the forecasting model (Method of technique)
• Gather and analyse the data needed for the forecast
• Prepare the forecast
• Monitor the forecast

12. Methods of Forecasting
• Qualitative Method
⚬ Decision Makers Intuition, experience &
knowledge
￭ Jury of executive opinion
￭ Sales Composite Method
￭ Market Research Method
￭ Other Judgmental Method (Delphi Method)

13. Methods of Forecasting
• Quantitative Method
⚬ Time Series Models
￭ Naive Approach
￭ Moving Averages Method
￭ Exponential Smoothing Method
⚬ Causal Models
￭ Trend Projection
￭ Linear Regression analysis