Demand Forecasting

Why Is forecasting necessary?

 Material/
Knowing
Inventory
Demand
Manpower Needed
Requirement

Facilities/
Warehouse
Machine and
(Space) needed
other
resources
• Inform
ation
Characteristics
must of good information
be
accura
te
• Inform
ation
must
be
accessi
ble in
a
timely
fashio
n
•
Demand Forecasting
Principles of forecasting
Basic Principles of Forecasting

• Forecasts are usually incorrect – most demand is dependent on so

many variables it is impossible to capture the impact of all.
• Forecasts are more accurate for families or groups of products
• Forecasts are more accurate for time periods closer to the present
• In general, the farther up the supply chain a company is (or the
farther it is from the consumer), the greater is the distortion of
information it receives. Therefore, every forecast should include an
estimate of error
Demand Forecasting
Qualitative forecasting
Types of Forecasting
• Qualitative Forecasting
• Quantitative Forecasting

7
 Qualitative Forecasting Methods
(Judgmental)
1. Jury of executive opinion - i.e. opinion of a group of
high level experts or managers.
2. Delphi method i.e. The group involves individuals from inside as
well as outside the organization.
3. Sales force composite i.e. Each regional salesperson provides
his/her sales estimates.
4. Consumer survey (Market research survey) i.e. Ask for
input from customers pertaining to their future purchasing plans
Demand Forecasting
Demand patterns
Components of Time Series - Demand Patterns

• Data should be plotted to detect for the following components:

• Trend variations: either increasing or decreasing

• Cyclical variations: wavelike movements that are longer than a year

• Seasonal variations: show peaks and valleys that repeat over a consistent
interval such as hours, days, weeks, months, years, or seasons
• Random variations: due to unexpected or unpredictable events
Demand

300

200

100

1 2 3 4 5 6 7
Time Period