Forecasting of demand is the art of predicting demand for a product or service at some future date on the basis of certain present and past behavior patterns of some related events.A demand forecasting is not a speculative exercise into the unknown but, essentially,reasonable judgement of future probabilities of the market events. It cannot be 100% precise but it gives a reliable approximation regarding the possible outcome, with a reasonable accuracy.
Forecasting of demand is the art of predicting demand for a product or service at some future date. Hence it plays an important role in the process of planning and decision making at micro as well as macro level. Expansion of output of the firm should be based on the estimates of likely demand, otherwise there may be over production and losses may have to be faced.For controlling the business on a sound footing, it is essential to have proper budgeting of costs and profits that is based on forecasting.Similarly, a satisfactory control of business inventories raw materials, semi-finished products, finished products, spare parts requires satisfactory estimates of future requirements, which can be traced through demand forecasting.Demand forecasting at macro level is of great help to the planners and policy makers for better planning and rational allocation of country’s resources. Though, it is not fool proof and correct but it helps in evaluating various forces which affects demand.
Scope of demand forecasting:
Forecasting can be at Micro as well as macro level. The scope of it will depend upon the area of operation in the present and in future. Much would depend up on the cost and time involved in relation to the benefit of the information acquired through the study of demand.
Methods of Demand forecasting: