Answer to Question #178711 in Finance for Sarfaraz

Question

2. Demand forecasting is not a speculative exercise into the unknown. It is essentially a reasonable judgement of future probabilities of the market events based on scientific background. Explain the statement by elaborating different qualitative and quantitative methods of demand forecasting. 

Answer 1

Demand forecasting is the process in which historical sales data is used to develop an estimate of an expected forecast of customer demand.

There are two types of forecasting methods: Qualitative and Quantitative.

Qualitative techniques are the ones which apply knowledge of the business, market, product and customer to make a judgment call on the forecast. These techniques are primarily based on opinion, like the Delphi Method, Market Research, Panel consensus etc.

Quantitative methods come in two main types: time-series methods and explanatory methods. Time-series methods make forecasts based purely on historical patterns in the data.