What is demand forecasting?

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

It also refers to estimating demand, scientifically and objectively on the basis of certain facts and events

Relevant to forecasting

Eg

 A leading car maker, refers to the last 12 months of actual sales of its cars at model, engine type, and color
level; and based on the expected growth, forecasts the short-term demand for the next 12 month for purchase,
production and inventory planning

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FACTORS AFFECTING DEMAND FORCASTING

Types of Goods:

There are many kinds of goods which affects the demand forecasting process
like producer good ,consumer goods or services .Apart from this ,goods can be
established or new goods .
Competition Level:

In a highly competitive market, demand for products also depend on the

number of competitors existing in the market.

Price of Goods:
Acts as a major factor that influences the demand forecasting process. The
demand forecasts of organizations are highly affected by change in their
pricing policies.
Level of Technology:
If there is a rapid change in technology, the existing technology or products
may become obsolete.
Economic Viewpoint:
Demand forecasting depends on the economic condition of the countrys
Economy
1 Specifying the Objective: The objective for which the demand forecasting is to be done must
be clearly specified
2 Determining the Time Perspective: On the basis of the objective set, the demand forecast
can either be for a short-period, say for the next 2-3 year or a long period
3 Making a Choice of Method for Demand Forecasting: Once the objective is set and the
time perspective has been specified the method for performing the forecast is selected. There
are several methods of demand forecasting falling under two categories; survey
methods and statistical methods.
4 Collection of Data and Data Adjustment: Once the method is decided upon, the next step is
to collect the required data either primary or secondary or both
5 Estimation and Interpretation of Results: Once the required data are collected and the
demand forecasting method is finalized, the final step is to estimate the demand for the
predefined years of the period