Factors Involved In Demand Forecasting

Generally, every business firm looks for profit maximization. It should carefully observe the market demand conditions for its products. It should also predict the changes in market demand in future. A prediction or estimation of future demand for the product is known as demand forecasting. There are so many factors involved in demand forecasting.

Normally, every business organization predicts a number of related forecasts. Since the future is uncertain, these forecasts may not be hundred percent accurate. But every organization tries to obtain the forecasts as precise as possible. Demand forecasting has a huge importance in planning. It helps to arrange the various factors of production and helps an entity to estimate the future demand for its products and plan its production. The factors involved in demand forecasting are discussed below.

Factors Involved In Demand Forecasting

1. Period of forecast: Forecasts are of two types. 1) short run forecast and 2) long run forecast. Short run forecast extends up to one year and long run forecast covers a period of 5 to 20 years.

2. Level of forecasting : Demand forecasting can be made at three levels:

a) Macro—level: It is concerned with business conditions of the economy as a whole. This will be made with the help of an appropriate index of industrial production, national income and expenditure etc. b) Industry level : It is made by chambers of commerce, trade associations, surveys of consumer’s intentions, analysis of statistical trends, c) Micro level : The forecasting which is undertaken at the firm level is micro—level forecasting.

3. Type of forecasting : Demand Forecasting may be either general or specific.

4. New products : Methods of forecasting for new products are different from those of well established products. These products are new to the economy as well as firm.

5. Nature of products demanded : Goods are generally classified as capital goods or producer’s goods and Durable consumer goods and non-durable consumer goods and services. They have different patterns of demand. All these patterns should be kept in mind while forecasting.

6. Peculiar features of market and product : Special features of the product and market should be taken into consideration in demand forecasting.

Most used Demand forecasting softwares in United States of America, United Kingdom, Canada and Australia are: QuickBase, Megaventory, SAP Supply Chain Management, Logistically TMS, Infor.

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