Beruflich Dokumente
Kultur Dokumente
By
Pooja. S. Shah
Roll No.33
PGDBM
2009-10
DEMAND FORECASTING
Meaning:
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Forecasting of demand is the art of predicting demand for a product or service at some
future date on the basis of certain present and past behavior patterns of some related
events.
A demand forecasting is not a speculative exercise into the unknown but, essentially,
reasonable judgement of future probabilities of the market events. It cannot be 100%
precise but it gives a reliable approximation regarding the possible outcome, with a
reasonable accuracy.
Usefulness:
Forecasting of demand is the art of predicting demand for a product or service at some
future date. Hence it plays an important role in the process of planning and decision
making at micro as well as macro level. Expansion of output of the firm should be based
on the estimates of likely demand, otherwise there may be over production and losses may
have to be faced.
For controlling the business on a sound footing, it is essential to have proper budgeting of
costs and profits that is based on forecasting.
Similarly, a satisfactory control of business inventories raw materials, semi-finished
products, finished products, spare parts requires satisfactory estimates of future
requirements, which can be traced through demand forecasting.
Demand forecasting at macro level is of great help to the planners and policy makers for
better planning and rational allocation of countrys resources. Though, it is not fool proof
and correct but it helps in evaluating various forces which affects demand.
Scope of demand forecasting:
Forecasting can be at Micro as well as macro level. The scope of it will depend upon the
area of operation in the present and in future. Much would depend up on the cost and time
involved in relation to the benefit of the information acquired through the study of demand.
Methods of Demand forecasting:
Demand Forecasting
(NATIONAL ANALYSTS)
National Analysts effectively generates demand estimates for clients in an
array of industry sectors by:
Competitive Landscape
A common error in demand forecasting is to ask potential decision makers
what they would purchase or use without properly sensitizing them to
environmental and competitive conditions that are likely to exist at a time
in the future when the product will be introduced.
For example, pharmaceutical firms need to forecast usage of a drug well
before introduction, but to obtain estimates of usage that are reasonably
reliable, it is critical to account for available brands and generic
alternatives as well as the regulatory and reimbursement environment
which is likely to appear when the new drug is introduced.
Competitive Timeline
exercises that enhance precision and create actionable insight whether the
product is currently available or clearly innovative.
Primary
Physicians
Size
of
population
Care Specialists
doctor 85,000
15,000
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Size
of
eligible 255,000
patient population
300,000
% of patients
new product
10%
35%
# of patients
25,500
105,000
In this
example there are five times more primary care physicians than specialists
yet specialists manage about the same number of patients who are eligible
for a new therapy. Demand forecasting estimates that specialists will
prescribe the new therapy for five times as many patients. Clearly, by
targeting specialists, a pharmaceutical firm could use a smaller sales force
to produce considerably more sales.
The presence of world-class segmentation and modeling expertise makes
National Analysts particularly effective in helping clients cost-effectively
target and acquire revenue.
There are five million diagnosed heart failure patients in the U.S.
A survey of physicians who treat heart failure produces an
unadjusted estimate that 40% of all heart patients would receive
drug X if it were available.
Anticipating more than two million patients, pharmaceutical firm A
invests heavily in advertising, promotion, and sales reps.
Three years after introduction, only 200,000 patients receive drug X.
While some research and consulting firms claim to have a formula for
various forms of error, National Analysts has found that variations in
product, market, and competitive conditions make canned approaches
unreliable. In fact, our most reliable calibrations for error are customized
using a combination of forecasting experience and modeling expertise
supplemented by a healthy dose of product, industry, and market
knowledge.
Integrating the Influence of Multiple Decision Makers
In many cases, reliable forecasts require an understanding and
measurement of multiple influencer or decision maker effects on demand.
National Analysts experience has taught them to tailor their forecasting
approach to the appropriate decision-making conditions. Frequently, it is
necessary to identify and survey multiple influencers or decision makers,
and then integrate their views. For example, if they are asked to estimate
the prescribing volume of a new drug therapy:
Then, for any particular combination of (1) a drug's clinical profile, (2) its
formulary status, and (3) the degree of patient demand and preference,
National Analysts can generate an estimate of prescribing volume.
Product Development
National Analysts is an industry leader in product development research.
Our client research support for product development is distinguished by:
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Portfolio Strategy
National Analysts helps clients maximize portfolio value by:
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Pre-launch .
Clients from a broad array of industries rely upon National Analysts to
help understand current and future market landscapes as they plan for
new product launches.
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Product Introduction
The primary objective at product launch is to build product awareness and
trial usage among early adopters and rapid followers.
This phase of the product lifecycle is characterized by heavy marketing
and promotional activity targeted to key customer segments. Emphasis is
placed on building effective distribution channels, and generating
momentum with regard to positive hearsay about and experience with a
new product.
Thus, communications effectiveness and early-stage product trial are key
concerns to clients in this phase, and National Analysts is often called
upon for guidance in design and execution of research to address:
Product Growth
Subsequent to introduction, a product may experience a rapid increase in
sales and profit. At this time, the primary objective is to sustain growth for
as long as possible while maximizing market share, often in the context of
a growing number of competitors. It is common in this stage for companies
to further differentiate a product and enhance its competitive edge.
Other methods for sustaining market growth include additional productrelated services, entry into new markets or market segments, the creation
of new promotional platforms, as well as the adoption of more competitive
pricing strategies.
National Analysts has had decades of experience supporting and helping
to guide clients' decision-making during this crucial phase of a products
lifespan. Examples of the types of assignments we routinely conduct
include:
Product Maturity
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Quantitative Research
National Analysts offers comprehensive global quantitative research
services including project design and management, sampling,
questionnaire
development,
data
collection,
and
data
analysis/interpretation.
Project Design & Management
Experienced senior project managers are closely involved in all phases of
research, from design through analysis to provide counsel and guide
implementation.
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Problem Definition
Successful assignments always begin with effective problem definition.
Helping clients conceptualize marketing issues and translate business
problems into practical research questions are what National Analysts
professionals do.
Sampling
The accuracy and credibility of research ultimately depend in large part on
a rigorous well-conceived sample design at the front end and proper
weighting procedures applied at the back. The presence of the experienced
sampling experts with them gives the flexibility to design and execute
exacting sampling plans.
Recent contributions to the field include refinement of a technique called
"ranking," a process designed to improve the accuracy of complex data
projections to a sampled population.
Questionnaire Development
National Analysts approaches the fine art of questionnaire design with
sensitivity to the challenges of measurement and a thorough appreciation
for all the various metrics that can be used to capture attitudes and
behaviors.
Data Collection in the US and Abroad
The breadth of what they do requires use of every data collection technique
including in-person interviews, mail or fax, telephone, electronic (web, disk,
CD) and any combination.
National Analysts was an early practitioner of electronic data collection
with over a decade of experience behind us.
Data Analysis
National Analysts is also prepared to incorporate secondary and customer
databases when necessary to support customer segmentation and
econometric modeling. The types of database services they provide include
merging, matching, and fusion of client and secondary proprietary
databases, as well as database scoring.
Statistical modeling is a valuable decision support tool; predictive models
help businesses make sound decisions that maximize revenue and profit,
and avoid missteps.
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Case Study 2:
Pantaloons Information Technology in Supply Chain
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Pantaloons (retail) India Ltd (PRIL) was set up as Manz Wear Private Limited on October
12, 1987. On September 25, 1992 Manz Wear Private Limited became Pantaloon
Fashions (India) Ltd and in July 1999 the name was changed to PRIL. In the initial years,
till mid 1990s, PRIL focused on developing its own clothing brands like Pantaloon
trouser, Bare Jeans and the John Miller range of shirts. The distribution of these
branded garments took place through multi-branded retail outlets. This changed in 1994
when PRIL introduced the Pantallon Shoppe, the franchise shops for mens wear.
PRIL was the first retail chain in India to experiment with different retail formats after the
managements decision in early 1990s to follow an aggressive expansion strategy. PRIL
launched the first family store in Kolkatta in 1997. PRIL entered in retail sector in big
way in 200-02, when it decided to setup hypermarkets under the name Big Bazaar selling
general merchandise for middle class consumers. PRIL also entered the grocery retailing
through supermarkets Food Bazaar in 2001-02. It also setup Gold jewelry stores called
Gold Bazaar (2003), seamless malls known as Central (2004), and Fashion Stations
(2005). In 2005 PRIL had 18 Pantaloons stores, 24 Big Bazaars, 36 Food Bazaars, 3
Cental Malls 2 Fashion Stations and 1 MeLa store (home textile and furnishing outlet)
operational across India. Its turnover in 2004-05 was about 11 billion. PRIl had a total
operational floor space of 3.5 million sq. km in 2005.
PRIl earlier used the traditional supply chain as in most Indian outlets. But it became
necessary for it to develop a more cost effective supply chain as a result of its aggressive
expansion strategy. Besides, expansion of stores and new retail formats made the
traceability of goods in the supply chain more and more difficult. The management
perceived that this lack of coordination was beginning to hamper PRILs operational
planning and Inventory management. In 2004, PRIL modified its expansion strategy
shifted from purely aggressing expansion strategy to expansion along with an increase in
operational efficiency.
As part of this modified expansion strategy, PRIL strengthened its back-end supply chain
and sourcing capabilities to reduce costs and enhance operational efficiency through a
huge investment in Information Technology solutions. In May 2005, PRIL announced its
IT strategy for the next three years. A decision to invest Rs. 1 billion in hardware,
software and business connectivity infrastructure was made. Earlier PRIL had used IT
solutions like Virtual Private Network (VPN) to handled heavy traffic of data, voice and
video. Most of these IT solutions were developed in-house and were not enough to
support the companys changing requirements. In 2005, PRIL entered into an alliance
with SAP to implement mySAP business suite. SAP Advanced Planning Tools (for
merchandise planning) and SAP Apparel and Footwear Solutions.According to
Deshpande, our strategic partnership with SAP, a world leader in business software
solutions provider, is the first step in realizing our IT vision. Surely, the cutting-edge IT
infrastructure will help in serving our customers better, give us improved customer
insights and add value to the business as a whole. During the same period PRIL also
decided to implement RFID to deliver higher operational efficiency and customer
satisfaction. In Radio Frequency Identification (RFID) technology, a Chip is attached to
the Product tag.
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This chip helps the company to ke track of the product through the entire supply chain.
The RFID application was developed by Wipro Infotech and was first implement at
PRILs central warehouse and manufacturing facility at Tarapur as pilot project costing
Rs. 3 million. Each RFID tag could hold 5 KB of memory. This application was tailored
to fit into PRILs existing IT infrastructure an business processes. The RFID pilot project
resulted in an improvement in accuracy of merchandise movement and helped save time.
PRIL plans to extend the RFID implementation to other retail outlets in the years to
come. The overall time frame for the implementation is likely to be one and half to two
years. PRIl also has to modify its business strategy to some extend when the RFID
technology is implemented throughout the supply chain. Chiner Deshpande, CIO of
PRIL, said, Today pantaloon Retail is in an explosive growth path and the leading
retailer in the country. To support this growth and maintain our competitive edge, a robust
and futuristic IT infrastructure has been planned for the next three years over Rs. 100
crores (1 billion).
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