Demand forecasting is very important for every trading or manufacturing organization. Without it, a business may supply more or less quantity of goods in the market which may ultimately create problems in the market. There are some steps in demand forecasting. They are discussed below.
Steps in Demand Forecasting
Following are the major steps in demand forecasting:
1. To understand the objectives of Demand Forecasting: before starting the forecasting exercise we must assess the prime objectives of doing this.
2. To decide the period of Forecasting : We should be thoughtful to decide whether it will be for a short-term or
a long-term demand or flexible enough to cover both short and long periods.
3. To determine the scope of forecasting : Be sure whether it will be for our products, total industry, for a particular area or at the national or international level.
4. To identify and study different variables: We must identify different factors affecting the demand for the
particular product for which demand forecast is to be made.
5. To collect market information: We have to collect the necessary statistics relating to market conditions, competitions etc.
6. To decide whether the forecast is to be made in terms of quantity or in monetary terms.This will depend on the objectives of the forecasting.
7. To select a particular method: From among various methods of forecasting, we have to select the best alternative which will serve our requirements.
8. To collect the data from different sources: No data should be irrelevant or arbitrary. And so we have to collect data from different sources in order to make the forecasting effective and meaningful.
9. To analyze and interpret the data: After collecting necessary data, we have to analyze and interpret them to draw a meaningful conclusion.
10. To draw and writing the report relating to the forecast: Based on the analysis make a report on the demand forecasting.