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M e Demandforecasting 100202064135 Phpapp02
M e Demandforecasting 100202064135 Phpapp02
Demand Forecasting
Six factors are involved in Demand Forecasting: 1. How far ahead both long-term (5, 10, 20 years)and short-term (upto 1 year)may be considered. Short-term forecast provides information for tactical decisions; it is concerned with day-to-day operations within the limits of resources currently available. Long-term forecast provides informatiion for major strategic decisions; it is concerned with extending or reducing the limits of resources.
5. Classification of products: It is important to classify products as producer goods, consumer durables or consumer goods and services. This is because economic analysis indicates different patterns of demand for each of these categories.
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Production Planning
Demand forecasting is a pre-requisite for production planning. Expansion of output is based on the estimates of likely demand; otherwise there will be over-production, piling up of inventory resulting in losses.
Sales Forecasting
Sales forecasting is based on demand forecasting. Advertising and other sales promotional efforts are planned based on sales forecasting.
Control of business
For controlling business it is necessary to prepare a proper budgeting of costs and profits. This is based on forecast of annual demand/sales and prices.
Inventory Control
A satisfactory control of business inventories, raw materials, intermediate goods, semifinished and finished products, spare parts, etc. requires reliable estimates of future requirements which can be traced through demand forecasting.
Stability
Stability in production and employment over a period of time is possible with suitable market demand forecasting and other business variables and by smoothening of business operations through counter-cyclical and seasonally adjusted business programmes.