Demand Forecasting Demand forecasting means expectation about the

Demand Forecasting Demand forecasting means expectation about the future course of the market demand for a product Demand forecasting assumes greater significance where large -scale production is involved. They need great deal of forward planning in acquiring of inputs, both men and material , organizing production, advertising the product, and organizing sales channels. Steps in Demand Forecasting Specifying the objective b. Determining the time perspective c. Making choice of method for demand forecasting d. Collection of data and data adjustment e. Estimation and interpretation of results. a.

Criteria for a Good Forecasting Method Accuracy ii. Plausibility iii. Durability iv. Flexibility v. Availability i.

Opinion Survey Method - This method is also known as Sales - Force polling or collective opinion method. Opinion is collected from the expert salesman as regards the likely sales in the future period Salesman can know and feel the customer’s reaction of estimating the likely demand for the product with the help of their personal judgment base on past experience. In this method the salesman or the expert are required to estimate expected sales in their respective areas.

Complete Enumeration Method & Sample Survey Complete Enumeration Method intends to interview all the customers of products witch are taken under forecast. On the basis of the information gathered, the demand forecasts are achieved by making a sum total of the expected demands for all the customers. Sample Survey – This method takes into a few consuming units of the total consuming population and collects information from them as regards their probable demand.

End Use Method & Experts Opinion Survey End Use Methods – When user-wise or sector-wise demand forecasts are to be made, consumers’ user survey or end use method is made use of. When we forecast total demand of a product. , we can obtain sector-wise demands individually for industries. , final consumers exports and imports etc. , by using method. Experts Opinion Survey – The total is generally built up by adding the individual salesman’s projection, scaling down the errors of optimism by pooling the collective wisdom of top executives in second guessing consolidating results.

Opinion Poll Methods �The opinion poll methods aim at collecting opinions of those who are supposed to possess knowledge of the market eg sales representatives, sales executives, professional marketing experts and consultants. �Expert opinion – sales representatives opinion is taken. �Delphi method- It is extension of the expert opionon. Revision of the expert opinion, use of statistical methods. �Market studies and experiments done in controlled laboratory and observing the behavior of the consumer

Statistical methods and Trend Projection methods Statistical Methods – Statistical method forecasting demand are those which makes use of certain statistical or mathematical techniques in predicting demand for a product in question. Most of the techniques used are highly complex and some of them require considerable mathematical techniques. Trend Projection Method – This method makes use of the statistical time series data. Time Series is an ordered sequence of events over a period of time pertaining to certain variable. Time series is a set of observations taken at specified times generally at equal intervals. The more popular method is to project the trend of a time series. One of he methods fitting a trend line through a series either visually or by means of statistical techniques such as the least squares regression. Box – Jenkins Method is used only for short-term projections and predictions. It is used where monthly or seasonal variations are recurring with some degree of regularity. Stationary time series can be analyzed by autoregression, moving average model, autoregression-moving average.

Barometric Techniques – This is done by the use of certain economical and statistical indicators. The prediction of turning points in one economic time series through the use of observations on another time series is called the barometer or the indicator �

BAROMETRIC TECHNIQUE Leading indicator, coincident indicator & lagging indicator �Leading indicators compare the existing data available. Which move up and down ahead of some other series. Eg business investment, orders for durable goods, value of inventories, prices of the material, profits etc. �Coincident indicators are the ones that move up or down simultaneously with the level of general economic activities. Eg employees on nonagricultural payrolls, industrial production, personal income less transfer payments, manufacturing and trade sales.

�Barometric Method of Forecasting Lagging series �Lagging series, consist of those indicators that follow a change after some time-lag. Eg labour cost per unit which increase after some time, outstanding loans, lending rates for short term loans. �Diffusion Index – when it is not possible to use only one indicator then they use difussion index. A diffusion index is the percentage of rising indicators. In calculating a diffusion index, for a group of indicators scores allotted are 1 to rising series, ½ to constant series and zero to falling series.

Econometric Methods �The econometric methods combine statistical tools with economic theories to estimate variables and to forecast the intended economic variables. The forecast made through this method are more reliable. � 1. Regression method and � 2. Simultaneous equation mode.