Demand forecasting

Short Range Forecasts

Time spans ranging from a few days to a
few weeks
Cycles, seasonality and trend may have
little effect
Random fluctuation is main data
component

Temperature (X)
25
26
28
29
30
32
35
36
37
38
39
40
41

No of Bottles sold
80000
120000
140000
129000
120000
200000
220000
240000
90000
180000
100000
240000
300000

Simple Moving Average

Forecasting Techniques
Qualitative approach:
1. Delphi methods
2. Marketing research and analysis
3. Survey of sales force
4. Survey of Customers

Forecasting Problems
Under Estimate
Lost Sales
Missing the market
Dissatisfied Customers
Insufficient Resources
Additional expediting cost

Over Estimate
Under utilized resource
Spending too early
Using Capacity too early

Selection of Forecasting Techniques

Quantitative forecasting:
* when past data are known as good
indicator for the future
* the pattern of the future can be
recognized from the past data.
Qualitative techniques:
* Data unavailable
* Unknown pattern change

Practical Forecasting Problems

1. practical forecasting issues:
* inaccuracy
* inconsistency
* cost and accuracy tradeoff
* data unavailability
* fitness and predictability

Criteria for Selecting a Forecasting

Method
Cost and accuracy
Data available
Time span
Nature of products and services
Impulse response and noise dampening

Criteria of a good Demand

Forecasting
Accuracy
Economy
Availability
Timeliness
Simplicity