Answer to Question #211560 in Management for Nachiket Pawar

Question

“Demand forecasting is an important tool for predicting the demand for an

organization’s products or services in a specified time period in the future” Enumerate any

three needs for demand forecasting and discuss the steps involved in demand forecasting.

(10 Marks)

Answer 1

Needs for Demand Forecasting

i. Fulfilling objectives entails that each company unit begins with a set of predetermined goals. Demand forecasting aids in achieving these goals. An organization determines the existing market demand for its products and services and then moves forward to meet the objectives.

ii. Budget preparation - Assists in the budgeting process by calculating expenses and expected income.

iii. Employment and production stabilization – Assists an organization in controlling its production and recruitment efforts. Producing items following anticipated demand help a business avoid wasting its resources.

Steps involved in demand forecasting

       i. Defining the Goal: The goal for which demand forecasting will be performed must be clearly defined. Long-term or short-term demand, the entire or only a sector of a market for a firm's product, overall demand for a product or simply for a firm's own product, and the firm's overall market share in the industry can all be used to define the goal.

     ii. Determining the Time Perspective: The demand prediction might be for a short period, such as the next 2-3 years, or a lengthy duration, depending on the aim specified.

   iii. Choosing a Demand Forecasting Method: Once the goal has been established and the time frame has been established, the forecasting method is chosen. Demand forecasting methods can be divided into two categories: survey methods and statistical approaches.

   iv. Data collection and data correction: After deciding on a method, the following step is to collect the necessary data, which might be primary, secondary, or both. Primary data are first-hand observations that have never been collected previously. The secondary data, on the other hand, is information that is already available.

     v.Demand Estimation and Interpretation: Once the necessary data has been gathered and the demand forecasting method has been finalized, the final stage is to estimate demand for the predetermined years of the timeframe.