Significance of Demand Forecasting

• Fulfilling objectives
➢ Implies that every business unit starts with certain pre decided objectives.
Demand forecasting helps in fulfilling these objectives. An organization
estimates the current demand for its product and services in the market
and move forward to achieve the set goals
➢ For example, an organization has set a target of selling 50,000 units of its
products. In such a case, the organizations would perform demand
forecasting for its product . If the demand for the organization product is
low, the organization would take corrective actions so that the set objective
can be achieved
• Preparing the budget
➢ Plays a crucial role in making budget by estimating cost and expected revenues . For
instance an organization has forecasted that the demand for its product, which is
priced at 10 would be 10,0000 units in such a case the total expected revenue would
be 10,0000 in this way demand forecasting enables organizations to prepare their
budget.
➢ Since ang demand forecasting ay tumutukoy sa pag predict ng mga maaring mangyari sa
hinaharap, Malaki ang magiging tulong nito sa pag prepare ng budget sa pamamamgitan
ng pag tatansya ng mga gastos at inaasahang kikitain ng organisasyon
• Stabilizing employment and production
➢ Helps an organization to control its production and recruitment activities.
Producing according to the forecasted demand of products helps in avoiding the
wastage of the resources of an organization. This further helps an organization to
hire human resources according to requirement.
➢ For example if an organization expects a rise in the demand for its product it may
opted for extra labor to fulfill the increased demand
➢ Another significance ng demand forecasting tumutulong itong ma control ang
isang organisasyon ang produksyon at pag recruit ng mga trabahador nag
poproduce lamang ang isang organisasyon ng naayon sa forcasted na demand ng
products upang wala silang masayang na mga resources o kagamitan
• Expanding organizations
➢ Implies that demand forecasting helps in deciding about the expansion of the
business of the organization . if the expected demand for products is higher then
the organization may plan to expand further. On the other hand if the demand for
products is expected to fall the organization may cut down the investment in the
business.
➢ Kung mataas ang magiging expected na demand para sa mga products maaring
mag desisyon ang isang oragnisasyon na palawakin or palakihin pa ang kanilang
business upang masabyan ang demand na ito.
• Taking Management Decisions
➢ Helps in making critical decisions such as deciding the plant capacity determining
the requirement of raw material and ensuring the availability of labor and capital
• Evaluating Performance
➢ Helps in making corrections. For example if the demand for an organizations
product is less it may take corrective actions and improve the level of demand by
enhancing the quality of its product or spending more on advertising
 • Helping the Government
➢ Enables the government to coordinate import and export activities and plan
international trade

Limitations of Demand Forecasting

Change in fashion and tastes

➢ Consumers tastes and preference continue to change with a change in fashion. This
limits the use of demand forecasting as it is generally based on historical trend analysis.

Uneconomical

➢ Forecasting is not only a time and effort demanding endeavour but also a money
consuming one forecasting needs various resources to push true and most especially it
needs personnel who will do the job. Due to this fact forecasting may be limited by lack
of funds as the job could be paralyzed in the absence of a fund that might consider as its
life blood

Lack of experts

➢ Demand forecasting requires effective skills, knowledge and experience of personnel

making forecasts. In the absence of trained experts demand forecasting becomes a
challenge for an organization this is because if the responsibility of demand forecasting
is assigned to untrained personnel, it could bring huge losses to the organization

Lack of past data

➢ It has been that history repeats it self. Hence by keeping records of imperative events
which had happened from the past we were given the chance to understand how those
past events occurs and relate in to the present situation that we have right now and
used the data that might be deduced from this to predict the future with the past we
where given the chance to take a glimpse of the future.this is the very reason why past
data is vey imperative to forecasting and the lack of it my post limit forecasting and may
even render such forecasting flimsy in nature for having lack of foundation on the past