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A demand forecast is the prediction of what will happen to your company's existing
product sales. It would be best to determine the demand forecast using a multi-functional
approach. The inputs from sales and marketing, finance, and production should be
considered. The final demand forecast is the consensus of all participating managers. You
may also want to put up a Sales and Operations Planning group composed of
representatives from the different departments that will be tasked to prepare the demand
forecast.
Delphi method
Your company may wish to try any of the qualitative forecasting methods below if you
do not have historical data on your products' sales.
There are two forecasting models here – (1) the time series model and (2) the causal
model. A time series is a s et of evenly spaced numerical data and is o btained by
observing responses at regular time periods. In the time series model , the forecast is
based only on past values and assumes that factors that influence the past, the present and
the future sales of your products will continue.
On the other hand, t he causal model uses a mathematical technique known as the
regression analysis that relates a dependent variable (for example, demand) to an
independent variable (for example, price, advertisement, etc.) in the form of a linear
equation. The time series forecasting methods are described below:
Description
Time Series
Forecasting
Method
Naïve Approach Assumes that demand in the next period is the same as demand in
most recent period; demand pattern may not always be that stable
For example:
Description
Time Series
Forecasting
Method
Moving Averages MA is a series of arithmetic means and is used if little or no trend is
(MA) present in the data; provides an overall impression of data over time
F 4 = [D 1 + D2 + D3] / 4
Equation:
F t + 1 = a D t + (1 - a ) F t
Where