Name: Salvador Lyndon P.

Rempillo
Course: MM-MPA
Reaction Paper: Forecasting and Demand Planning

An organization faces several internal and external risks, such as high competition, failure of
technology, labor unrest, inflation, recession, and change in government laws. Therefore, most of
the business decisions of an organization are made under the conditions of risk and uncertainty.
An organization can lessen the adverse effects of risks by determining the demand or sales
prospects for its products and services in future. Demand planning is a systematic process that
involves anticipating the demand for the product and services of an organization in future under
a set of uncontrollable and competitive forces. Demand forecasting enables an organization to
take various business decisions, such as planning the production process, purchasing raw
materials, managing funds, and deciding the price of the product. An organization can forecast
demand by making own estimates called guess estimate or taking the help of specialized
consultants or market research agencies. Demand plays a crucial role in the management of
every business. It helps an organization to reduce risks involved in business activities and make
important business decisions. Apart from this, demand forecasting provides an insight into the
organization's capital investment and expansion decisions. Fulfilling objectives implies that
every business unit starts with certain pre-decided objectives. Demand planning helps in
fulfilling these objectives.
An organization estimates the current demand for its products and services in the market
and move forward to achieve the set goals. 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 resource according to requirement. 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. Qualitative forecasting is an estimation methodology that uses expert
judgment, rather than numerical analysis. This type of forecasting relies upon the knowledge of
highly experienced employees and consultants to provide insights into future outcomes. This
approach is substantially different from quantitative forecasting, where historical data is
compiled and analyzed to discern future trends.
Qualitative forecasting is most useful in situations where it is suspected that future results
will depart markedly from results in prior periods, and which therefore cannot be predicted by
quantitative means. For example, the historical trend in sales may indicate that sales will increase
again in the next year, which would normally be measured using trend line analysis; however, an
industry expert points out that there will be a materials shortage at a key supplier that will force
sales downward.Qualitative forecasting gives management the flexibility necessary to use non-
numerical data sources, such as the intuition and judgment of experienced managers, sales
professionals and industry experts. This can improve the quality of a forecast because
quantitative data cannot capture nuances that years of experience can detect