DEMAND FORECASTING

INTRODUCTION
A forecast is a prediction or estimation of future situation, under given condition. Forecasts can be classified into two categories: 1) Passive forecast: when prediction about future is based on the assumptions that the firm does not change the course of its action. 2) Active forecast: where forecasting is done under the condition of likely future changes in action by the firm.

FORECASTING TECHNIQUES
Forecasting techniques can broadly be classified into two categories: a) Qualitative b) Quantitative

forecasting techniques
Qualitative techniques Quantitative techniques

Expert opinion method

Survey method

Trend projection Method Barometric techniques

Complete Enumeration Survey method

Sample Survey method

Sales force Opinion Survey method

Econometric techniques

Regression method

Simultaneous method

Qualitative techniques Expert opinion method seeks the views of experts. Delphi method seeks the opinion of a group of experts indirectly. Advantages: simple; reliable; inexpensive; takes little time. Disadvantages: Unscientific; biased.

Delphi method
Multi-step method A special group of experts in economic forecasting exchange views and each individual submit estimation and assumption through an analyst. Analyst review all the data received and issues a summary report. This summary report is then discussed and viewed by group members individually. Group members submit revised forecast to the analyst. Analyst again review material and issues a secondary report. This process continues until all participant reach a common ground.

CONSUMERS COMPLETE ENUMERATION SURVEY Complete survey of all consumers. Interviews or questionnaires are used. Advantages: accurate; simple; not affected by personal biases. Disadvantages; costly; time consuming; difficult and practically impossible. CONSUMERS SAMPLE SURVEY Miniature form of complete enumeration method. Only a few consumers are selected and their views on the probable demand is collected.

Advantages: Simple; less cost; can give excellent results, if used carefully. Disadvantages: conclusions are based on the views of only a few consumers and not all of them. Sample may not be true a true representation of the entire population.

SALES FORCE OPINION METHOD Similar to expert opinion method. Employees (sales and marketing teams) of company are asked to predict future levels of demand. ADVANTAGES: simplest; less costly; data collection is easy. DISADVANTAGES: Consumer taste and preferences keep changing with time. Sales force may give biased views as the projected demand affects their future job prospects.