Demand Forecasting

Demand forecasting is the process of determining the amount of a product or service

that consumers are likely to wish to buy in the future. Accurate, timely forecasts are invaluable
for both businesses and their customers. Indeed, time series analysis may not offer correct
results in the long term. Furthermore, the proper data model could be mistakenly identified due
to human error. This can have a domino effect on the result. (Vaidya, 2023). There are six types
of demand forecasting: passive demand forecasting, active demand forecasting, short-term
projections, long-term projections, external macro forecasting, and internal business
forecasting. (Rheude & Rheude, 2023)

Pros of Using Demand Forecasting

 You can spot seasonal variations and create accurate sales estimates by analyzing
historical sales data. Demand might alter seasonally for several reasons, including
weather, holidays, and cultural events. For Instance, if your sales dip every March, that
could be an excellent time to offer discounts to keep sales on target.
 By looking at historical sales data, we can spot seasonal changes in demand. By using
this data to anticipate future sales income and COGS, you may decide wisely regarding
inventory planning and logistics. This data can be used to invest in keeping inventory
levels where they need to be.
 Every business has to be ready to weather the unexpected. Accurate demand forecasting
will help prepare for any unexpected market dips and plan the supply of inventory.

Effective Methods to Use

 Regression analysis: is a tool that helps businesses find and understand the connections
between variables, such as sales, conversions, and email signups. Companies can get
invaluable knowledge about how these variables interact by using this analytical tool.
Regression analysis helps us determine which factors really matter and their
relationships. It also helps us find out what their effects are on sales figures. (Nordqvist,
2021)
 Market Research/Surveying: You can learn a lot from surveys that simply cannot be
collected from a sales figure. Customer surveys are crucial demand forecasting tools,
 which are another method used in market research. Nowadays, online surveys are
prevalent, which reduces the paperwork and the time taken to complete.
 Econometric Method: This approach uses mathematical calculations to forecast future
client demand. The approach is focused on how many economic variables interact to
influence how much need for a given company's goods exists. For instance, when the
COVID-19 pandemic closed all stores and a curfew was imposed in most countries, there
was an increased demand for online shopping as customers locked down and avoided
the in-store experience.

Conclusion
In conclusion, all the above-mentioned demand forecasting methods are crucial tools in
an era when data-driven insights are crucial because they provide a comprehensive, fact-based
perspective on the complex interactions between variables. It is also important to note that
most of the time, demand forecasting may invoice more than one method.

References
Rheude, J., & Rheude, J. (2023, May 2). Demand Forecasting: Types, methods, and examples.

Red Stag Fulfillment. https://redstagfulfillment.com/what-is-demand-forecasting/

Taylor, S. (2023, October 19). Regression analysis. Corporate Finance Institute.

https://corporatefinanceinstitute.com/resources/data-science/regression-analysis/

Nordqvist, C. (2021, November 23). What is regression analysis? Definition and examples.

Market Business News. https://marketbusinessnews.com/financial-glossary/regression-

analysis/.

Vaidya, D. (2023, May 9). Time Series analysis. WallStreetMojo.

https://www.wallstreetmojo.com/time-series-analysis/