Answer to Question #271648 in Management for praynay

Question

. Mo-Bike is electric two-wheeler mobility service provider. Their model is to provide 

quick, flexible, self-driving mobility from Metro Station to near by Business and IT park

where about 5000 people commute every day. They want to forecast next 5 years

number of users to plan business model. 

a. Describe steps in demand forecasting in this case situation?                     

 

b. Describe methods of demand forecasting? 

Answer 1

1.Determining the objectives

The first step in this regard is to consider the objectives of sales forecasting carefully.

2. Period of forecasting

Before taking up forecasting, the company has to decide the period of forecasting — Whether it is a short-term forecast or long-term research.

3. Scope of forecast

The next step is to decide the scope of forecasting— Whether it is for the products, or for a particular area or total industry or at the national/international level.

4. Sub-dividing the task

Sub-dividing the task into homogeneous groups, according to product, area, activities or consumers. The figure of sales forecasting shall be the sum total of the sales forecasts of all the groups.

5.Identify the variables

The different variables or factors affecting the sales should be identified so that due weightage may be given to those different factors.

6. Selecting the method

Appropriate method of sales forecasting is selected by the company taking into account all the relevant information, purpose of forecasting and the degree of accuracy required.

7. Collection and analysis of data

Necessary data for the forecast are collected, tabulated, analyzed and cross-checked. The data are interpreted by applying the statistical or graphical techniques, and then to draw necessary deductions there from.

8. Study of correlation between sales forecasts and sales promotion plans

Making the forecast reliable, the sales promotion plans such as advertising, personal selling and other sales programmes should be reviewed. A study of correlation between sales forecasts and sales promotion plans should be made in order to establish their role in promoting the sales.

9. Competitors activities

Volume of sales of a company is largely affected by the activities of competitors and, therefore, the forecaster must also study the competitors’ activities, policies, programmes and strategies.

10. Preparing final sales forecasts

The preliminary sales forecasts figure should be reviewed and final sales forecast figures should be arrived at after making all adjustments.

11. Evaluation and adjustments

The figures of final sales forecasts form the basis for the operations of the company in the next period. The actual sales performance in the forthcoming period should be reviewed and evaluated from time to time viz, monthly, quarterly, half-yearly or yearly and so on. The forecast figures should be revised in the light of difficulties experienced

Methods of demand forecasting

1. Survey of Buyer’s-Intentions:

This is a short-term method of knowing and estimating customer’s demand. This is direct method of estimating demand of customers as to what they intend to buy for the forthcoming time—usually a year.

2. Collective Opinion or Sales Force Competitive Method:

Under this method, the salesman are nearest persons to the customers and are able to judge, their minds and market. They better understand the reactions of the customers to the firms products and their sales trends. The estimates of the different salesmen are collected and estimates sales are predicted.

3.Trend projection

This is the most popular method of analysing time series and is generally used to project the time trend of the time series. A trend line can be filled through the series in visual or statistical way by the method of least squares.

4. Executive Judgment Method:

Under this method opinions are sought from the executives of different discipline i.e., marketing, finance, production etc. and estimates for future demands are made. Thus, this is a process of combining, averaging or evaluating in some other way the opinions and views of the top executives.

5. Economic Indicators:

This method has its base for demand forecasting on few economic indicators.

(a) Construction contracts:

For demand towards building materials sanctioned for Cement.

(b) Personal Income:

Towards demand of consumer goods.

(c) Agricultural Income:

Towards demand of agricultural imports instruments, fertilisers, manner etc.

6. Controlled Experiments:

Under this method, an effort is made to ascertain separately certain determinants of demand which can be maintained, e.g., price, advertising etc. and conducting the experiment, assuming etc., and conducting the experiment, assuming that the other factors remain constant.

7. Expert’s Opinions:

Under this method expert’s opinions are sought from specialists in the field, outside the organisations or the organisation collects opinions from such specialists; views of expert’s published in the newspaper and journals for the trade, wholesalers and distributors for the company’s products, agencies and professional experts.