Demand Forecasting

Demand Forecasting

Demand is an essential concept in the business world. Managers need to know about their product demand before release it. It helps to fix the price and supply the right amount of products.

What is Demand Forecasting?

The process of estimating the demand of customers over a period is called Demand Forecasting. Businesses find it using historical data and other information. At first, they gather all the information about the market and demand from different aspects. Based on this, they estimate future demand. This process is called demand forecasting.

Here is an example. Suppose X Company sold 450, 500, and 550 units of their products in May, June, and July. So it can be said that August’s approx. The sale will be 500 units.

Use of demand Forecasting

Businesses make many decisions based on demand. There is no alternative to making the right decision at the right time to stay in a competitive market. Success depends on this decision. Demand helps to achieve business objectives. The decision of production, sales, and staff and resource requirements depends on demand. Demand forecasting is also necessary at the international level.

What are the Types of Demand Forecasting?

Demand forecasting is classified based on time, scope, detailing, and many more. Here are some significant types of demand forecasting:

Short-term Demand Forecasting

It lasts for a short period. It’s approx. Carried out time is 3 to 12 months. Short-term demand forecasting considers the seasonal pattern of demand. It also discusses the effect of tactical decisions on customer demand.

Mid to Long Term Demand Forecasting

It’s approx. Carried out time is 12 to 24 months in advance. Sometimes it can be 36 to 48 months also. It helps to set business strategy planning, financial, marketing, and sales and capacity planning, capital expenditure, etc.

Internal Level Demand Forecasting

It deals with internal operations. It includes operations like product category, sales, and financial division and manufacturing group. It also includes net profit margin, COGS, annual sales forecasting, cash flow, etc.

External Level Demand Forecasting

It deals with broader market movements. It mainly depends on the macroeconomic environment. It includes evaluating the strategic objectives like expanding portfolio and customer segments, technological disruptions, risk mitigation strategies, and many more.

Active Demand Forecasting

It carries out for scaling and diversifying businesses with growth plans. These plans are made in marketing activities, product portfolio expansion, and competitor, internal and external environment. 

Passive Demand Forecasting

It carries out for stable businesses with conservative growth plans. It is suitable for small and local companies. Proper demand forecasting is essential to gain business objectives. Businesses can use any forecasting demand according to their need. Visit Runnel.Ai