DEMAND

FORECASTING

Dr. Mohd Taqi

D E M A N D FORECASTING

ESTIMATION OF
EXPECTED
DEMAND OVER A
SPECIFIED
FUTURE PERIOD.
 LEVELS IN WHICH D E M A N D
FORECASTING C A N BE APPLIED:

➢ MICRO LEVEL

➢ INDUSTRY
LEVEL

➢ MACRO LEVEL
❑ M I C RO LEVEL
It is the demand forecasting by individual
business firm for estimating the demand
for its product.

❑ INDUSTRY LEVEL
It is done at the industry as a whole by
respective trade associations for the use
of their member firms.

❑ M A C R O LEVEL

It is done at a wider level. It is the

aggregate demand for the industrial
output by the nation as a whole. It is
based on the national income or
aggregate expenditure of the country.
 TYPES OF D E M A N D FORECASTING

❑ SHORT TERM DEMAND FORECASTING

It is done for a period usually not

exceeding one year may be over a
month or a half year. It is done after
taking into consideration the
changes that are taking place in

the immediate future.

PURPOSES OF SHORT TERM D E M A N D
FORECASTING

▪ To evolve a suitable production policy.

▪ To reduce the cost of purchase.
▪ To determine appropriate price policy.
▪ To set sales target and establish control.
▪ To forecast short term financial
requirements.
❑ L O N G TERM D E M A N D FORECASTING

Long term forecasting is essential to decide upon

the size of the business unit, its fund
requirements, manpower requirements etc. It also
seeks to find out the scope for future expansion
of the business.
PURPOSES OF L O N G TERM D E M A N D
FORECASTING

 Planning of a new unit or expansion of the existing unit.

 Planning of long term financial requirements of the

business.

 Planning of manpower requirements.

 STEPS IN D E M A N D FORECASTING

▪ DETERMINATION OF OBJECTIVE:
There must be a specific objective that must be stated clearly.

▪ SUB-DIVIDING THE TASKS:

Total tasks be subdivided into small tasks on the basis of product,
sales territories or market.

▪ IDENTIFYING DEMAND DETERMINANTS:

All the factors affecting demand must be identified.

▪ SELECTION OF METHOD:
A suitable forecasting method can be selected after considering
the nature of the product, forecast objective etc
 STUDY THE ACTIVITIES OF THE COMPETETORS:
All the activities of the competitors that are affecting the
demand of the product is to be considered.

▪ EVALUATION OF SALES FORECAST:

Analyzing the past details of the product sales and forecasting
the future demand.

▪ REPORTING:
Presenting the analyzed data in an understandable form to
the management.