1. DEMANDFORECASTING

2. DEMAND FORECASTING Forecasting of demand is the art of Predictingdemand for a product or a service at some future dateon the basis of certain present and past behaviorpatterns of some related events. Demand Forecast is an estimate of sales during aspecified future Period which is tied a Proposedmarketing plan and which assumes a Particular set ofuncontrollable and competitive forces-Cundiff and still 3. SIGNIFICANCE OF DEMAND FORECASTING: Production Planning Sales Forecasting Control of business Inventory Control Growth and Long Term Investment Programmes Stability Economic Planning and policy making 4. NEED OF FORECASTING: Need of short term forecasting :-Appropriate production Scheduling-Helping the firm in reducing costs-Determining appropriate price policy-Setting sales Targets and establishing controls & Incentives-Forecasting Short term financial requirements. 5. Need of Long Term Forecasting: -Planning of a new unit or expansion of an existingunit -Planning Long term financial Requirements -Planning Man Power Requirements 6. METHODS OF FORECASTING: Opinion Polling Method/QualitativeTechniques:In this case , the opinion of the buyers , sales force andexperts could be gathered to determine the emergingtrend in the market. 7. The opinion polling methods of demand forecasting areof three kinds:Consumer survey method:-Complete Enumeration Survey-Sample survey and test marketing-End use methodSales force Opinion MethodDelphi Technique 8. Consumer survey method:The most direct method of forecasting in short run.Surveys are conducted to collect information aboutfuture purchase plans of the probable buyers ofproduct.a)Complete Enumeration survey:In this case the firm has to go for a door to door survey.b)Sample survey & Test Marketing:In this method some representative households areselected on random basis as samples & their opinionis taken as the generalized opinion. 9. C)End Use method:In this case , demand for Final Product is theend use demand of the intermediate productused in the Production of this final Product. 10. ii)Sales Force Opinion Method:Also known as collective Opinion Method.Instead of consumers the Opinion of consumers issought.Also referred as grass root approach as it is a bottomup method.iii)Delphi Technique:Also known as expert Opinion method of investigation.Instead of depending upon the Opinions of buyers &salesmen Firms can obtain views of specialist orexperts in their respective fields. 11. Statistical or Analytical Methods/QualitativeTechniques: Trend Projection Method: -Graphical Method -Least Square method -Time series Data -Moving average method -Exponential smoothing 12. Barometric method Regression method Econometric method 13. Trend Projection method: A firm uses its own data of past yearsregarding itssales in past years.(This data is known as time seriesof sales.) A firm can predict sales of the product by fitting trendto the time series of sales. The trend can be estimated by using any one of thefollowing method: 14. Graphical method: In this case old values of sales for different areas areplotted on graph & a free hand curve is drawnPassing through as many Points as possible. The direction of this free hand curve shows the trend. 15. Least Square Method: It is based on the assumptions. In which the past rate of change of the variable understudy will continue in the future. This method is very popular because it is very simpleand inexpensive. 16. Time series Data/Analysis: Time series data refers to the data collected over aperiod of time recording historical changes in price,Income, and other related variables InfluencingDemand for the commodity. Time series analysis relate to the determination ofchanges in a variable in relation to time. 17. Moving Average Method: {It is the process of computing average of leaving theoldest observation and including the next one.} In this method the moving average of the sales of thepast years is computed. The computed moving average is taken as forecast forthe next year or period. 18. Exponential Smoothing: It is very Popular technique for short run. It uses weighted average of past data as the basis forforecast. In this Procedure heaviest weight is to more recentinformation and smaller weights to observation in themore distant past. It is effective only when there is randomness and noseasonal fluctuation. 19. Barometric Method: Also known as leading Indicators Forecasting. NBER of U.S.A. has identified three types of indicators:- i)Leading Indicatorsii) Coincidental Indicators iii) lagging indicators.The analyst should establish relationship between the sales of the product & the economic indicators to project the correct sales & to measure to what extent these indicators affect the sales. 20. Regression method: Very common method of forecasting. In this method a relationship is established betweenquantity demanded and Independent variables such asIncome, Price, prices of the related goods etc. Once the relationship established, we deriveregression equation assuming relation to be linear. The equation in the form of Y=A+ Bx. Once the regression equation is derived thevalue of Y i.e. quantity demanded can beestimated for any value of X. 21. Econometric Method: The econometric model forecasting involvesestimating several simultaneous equation. It is also known as Simultaneous equations method. 22.