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Demand Forecasting

The document discusses demand forecasting including its definition, objectives, and importance for short term and long term planning. Demand forecasting helps companies predict future demand, set production and sales targets, manage finances and resources, determine pricing, and make long term strategic decisions around capacity, expansion, and training.

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Nainika Reddy
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27 views15 pages

Demand Forecasting

The document discusses demand forecasting including its definition, objectives, and importance for short term and long term planning. Demand forecasting helps companies predict future demand, set production and sales targets, manage finances and resources, determine pricing, and make long term strategic decisions around capacity, expansion, and training.

Uploaded by

Nainika Reddy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Demand Forecasting

SCMS Bengaluru
What is Demand Forecasting
• Predictions of future demand for a firm’s
product or products
• Forecasts are necessary for
– Preparing of a budget
– Stabilizing of employment and production
– Expansion of firm
Objectives of Demand Forecasting
• Objectives of Demand Forecasting can be
divided into:
– Short term objectives
– Long term objectives
Short Term Objectives
• Production Policy
• Short term Finance Management
• Pricing Policy
• Achieving Sales target
• Advertising and promotion activities
Production Policy
• Helps in managing pap between the demand and
supply of the product.
• Helps in estimating the requirement of raw
material
• It further helps in maximum utilization of
resources
• Requirement of human resource
Short term Finance Management
• The financial requirement depends on the
production
• Hence, demand forecasting helps in ensuring
there is required liquidity in the organization
to meet the regular expenses and continue
the production activities
Pricing Policy
• Pricing is one of the most important objectives
of demand forecasting.
• Price of its products depends on the demand
for the product.
• Hence, firms need to forecast the demand to
see how they can change the price of their
products.
Achieving Sales target
• Achieving the sales target is extremely
important for any firm
• Demand forecasting helps in setting new sale
target that will be challenging for the sales
team
• This will help in improving sales and entering
new markets
Advertising and promotion activities
• Demand forecasting helps in deciding the
need for advertising and promotion activities
• The sales for a product depend on the
advertising and promotion activities.
• These have to be decided and strategically
utilized to maximize sales
Long Term Objectives
• Production Capacity
• Diversification of business
• Long term finance management
• Determination of Expansion path
• Training of Man power
Production Capacity
• In the long term the firm will definitely want
to increase its production capacity
• For this they have to estimate how the
demand for their product is going to change in
the future
• They also need to consider change in taste &
preferences over time.
Diversification of business
• In addition to producing the current products
it is also important for businesses to diversify
their business to minimize the risk.
• This requires them to understand their
advantages and the future requirements for
which demand forecasting is extremely
important
Long term finance management
• In order to meet the requirements of
increasing production capacity or diversify
their business the firms need to undertake
huge investments.
• This requires them to plan and approach the
best option to raise funds in order to save
cost, wherein demand forecasting helps.
Determination of Expansion path
• The expansion path is important for any firm
as it shows how they would grow in the
business.
• Demand forecasting helps in determination of
the expansion path and make decisions based
on facts to achieve the objective
Training of Man power
• With changing time there is also a change in
the knowledge requirement of the man power
in an organization.
• Demand forecasting helps in training and
upgrading the man power as per the
requirement.

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