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Demand Forecasting

Presentation · December 2020

DOI: 10.13140/RG.2.2.20068.60806

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Suresh Tannan
Raffles University
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Demand Forecasting

By S.K Tannan
 Introduction
 Demand forecasting is the activity of
estimating the quantity of a product or
service that consumers will purchase.
 Demand forecasting involves techniques
including both informal methods, such as
educated guesses, and quantitative
methods, such as the use of historical sales
data or current data from test markets.
 Demand forecasting is used in making
pricing decisions, assessing future capacity
requirements, or in making decisions on
whether to enter a new market or not.
 Necessity for forecasting demand
 Often forecasting demand is confused with
forecasting sales. But, failing to forecast
demand ignores two important phenomena
 There is a lot of debate as how to measure
and represent historical demand, since the
historical demand forms the basis of
forecasting.
 Should we use the history of outbound
shipments or customer orders or a
combination of the two to proxy for demand.
 Market response effect
 The effect of market events that are within
and beyond a retailer’s control.
 Demand for an item will likely rise if a
competitor increases the price or if you
promote the item in your weekly circular.
 The resulting sales increase reflects a
change in demand as a result of consumers
responding to stimuli that potentially drive
additional sales.
 Regardless of the stimuli, these forces
need to be factored into planning and
managed within the demand forecast.
Methods of Forecasting Demand
 No demand forecasting method is 100%
accurate.
 Combined forecasts improve accuracy and
reduce the likelihood of large errors because:
(a) No method is perfect and no method is
useless.
(b) No method is best under all circumstances.
(c) The best method may not be available in a
particular situation due to the constraints from
data or resources (time and money)
  For more details, please contact:
 Prof. S.K Tannan
 E-mail:
sureshkumartannan@gmail.com,
sktannan@rediffmail.com
 (M) 9899957644

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