The importance of demand forecasting in business organizations

Forecasting may be defined as a technique of translating past experience into the prediction of things to come.

steps in demand forecasting

For example, if an economy enters into depression or recession phase, the demand for products falls. Short Period Forecasts: Refer to the forecasts that are generally for one year and based upon the judgment of the experienced staff.

Demand forecasting meaning in tamil

On the other hand, if the demand for products is expected to fall, the organization may cut down the investment in the business. Deciding the production capacity: Implies that with the help of demand forecasting, an organization can determine the size of the plant required for production. If there is a rapid change in technology, the existing technology or products may become obsolete. In Managerial Economics, demand forecasting achieved a prominent place. The ability to precisely forecast demand, affords the organization opportunities to control costs through leveling its production quantities, rationalizing distribution, and efficient logistics operations. The inventory levels for the store can then be increased during that time of the year to meet customer demands. In competitive market conditions, there is a need to take correct decision and make planning for future events related to business like a sale, production, etc. Read More:. Demand forecasting is bound to become more important with the growing industrialization of the country. Share on Facebook Demand forecasting helps companies prepare beyond the current period. Reliable and accurate sales forecasts can help the management to access the appropriate labor requirements. These forecasts are carried to determine the growth of population, development of the economy, political situation in a country, and changes in international trade in future.

On the national level, sales forecasts of particular products may provide guideline for demand forecasts for related industries. On the other hand, if the demand for products is expected to fall, the organization may cut down the investment in the business.

April 21, Leave a comment Most business decisions of an organization are made under the conditions of risk and uncertainty.

The importance of demand forecasting in business organizations

Too small or Too large size of the plant may not be in the economic interest of the enterprise. The Government, on the basis of sales forecasts, may decide whether imports are necessary to meet the deficit in the home demand or may provide export incentives for any surplus. Controlling sales: Helps in setting sales targets, which act as a basis for evaluating sales performance. Time Period of Forecasts: Act as a crucial factor that affect demand forecasting. This means identifying the things that it does well and where the business missed the mark. To know what a business should perform, we must know its future sales. It helps an organization to reduce risks involved in business activities and make important business decisions. Share on Facebook Demand forecasting helps companies prepare beyond the current period.

This means identifying the things that it does well and where the business missed the mark. Historical reports may be used to research whether demand for a certain product increases during certain times of the year.

uncertainties in demand forecasting
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Demand Forecasting: Meaning, Objectives, Features, Need