Demand Forecasting - Management Assignment Help

Fore casting of demand is the art of predicting demand for a product or a service at some future date on the basis of certain present and past behavior patterns of some related events.

According to Condit and Still” Sales forecast is an estimate of sales during a specified future period which is tied to a proposed marketing plan and which assumes a particular set to uncontrollable and competitive forces.

Accurate demand forecasting is essential for a firm to enable it to produce the required quantities at the right time and to arrange well in advance for various inputs. Forecasting helps a firm to assess the probable demand for its products and plan its production accordingly.

Usefulness

Forecasting of demand plays a vital role in the process of planning and decision making whether at the national level or at the level of a firm. The importance of demand forecasting has increased all the more on account of mass production and production in response to demand. No useful business planning can be done without proper estimates of demand forecast. It would not be an exaggeration to say that all business planning starts with forecasting of demand because capital investment production scheduling etc has to be related with the expected demand. Although it is said no forecast is completely fool proof and correct but the very process of forecasting helps in evaluating various forces which affect demand and is in itself a reward because it enables the forecasting authority to know about various forces relevant to the study of demand behavior.

Scope of Forecasting

Forecasting can be at the international level depending upon the area of operation of given economics institution. It can also be confined to a given product or service supplied by a small firm in local area. The scope of work will depend upon the area of operation in the present and proposed in future. Much would depend upon the cost and time involved in relation to the benefit of the information acquired through the study of demand. The necessary trade off has to be struck between the cost of forecasting and the benefits flowing such forecasting.