DEMAND FORCASTING

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Overview

What is demand forecasting? Necessity of forecasting demand. Factors involved. Types of forecasting

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Meaning

Demand forecastingis the activity of estimating the quantity of a product or service that consumers will purchase. Demand forecast forms the basis of all Supply chain. Demand forecasting involves techniques including both informal methods, and quantitative methods Demand forecasting used in making pricingdecisions, in assessing future 4/21/12 capacity requirements, or in making

Necessity for forecasting demand

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All push processes in the supply chain are performed depending upon the customer demand, whereas all pull processes are performed in response to customer demand. For push processes, a manager must plan the level of activity , be it production, transportation, or any other planned activity, for pull processes, A manager must plan the level of available capacity & inventory but not the actual 4/21/12 amount to be executed

Basic Approach To Demand Forecasting

The following six-step approach helps an organization perform effective forecasting: Understand the objective of forecasting Integrate demand planning & forecasting throughout the supply chain Understand & identify customer segments Identify the major factors that influence 4/21/12 the demand forecast

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Factors Involved
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How far ahead?

a. Long term e.g. petroleum, paper, shipping, Tactical decisions. b. Short-term e.g. clothes, Perfumes, FMCG, Strategic decisions.

Undertaken at three levels: Macro-level, Industry level, Firm level

General or Specific
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Methods

There are tow types 1) Qualitative forecasting 2) Quantitative forecasting

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Qualitative forecasting
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Qualitative forecasting methods are primarily subjective and the rely on human expertise and judgment. Most appropriate when little historical data are available like in the case of demand forecasts for new products Popular qualitative forecasting methods are: Delphi, Market research, Life cycle analogy & judgment methods
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Qualitative forecasting

Unaided judgment Prediction market Delphi technique Game theory Judgmental bootstrapping Simulated interaction Intentions and expectations surveys Conjoint analysis
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Qualitative forecasting
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Delphi Approach: The Delphi method employs a panel of experts in arriving at the forecast & proceeds through a series of rounds. It is iterative method wherein each expert is asked to make individual predictions based on available data. Market Research: Market research involves estimation of the market size based on testing new4/21/12 products

Quantitative forecasting
Within quantitative models two types are commonly used in forecasting applications:
1. 2.

Time-series Causal

Time series method of forecasting uses historical data to make forecasts. It is assumed that the future is going to be 4/21/12 very similar to the past.

Quantitative
forecasting

Discrete Event Simulation Extrapolation Reference class forecasting Quantitative analogies Rule-based forecasting Neural networks Data mining Causal models
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Quantitative forecasting
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Seasonality: A seasonal pattern(e.g., quarter of the year, month of the year, week of the month, day of the week) exists when demand is influenced by seasonal factors. Trend: During the growth and decline stages of the product life cycle, a consistent trend pattern in terms of demand growth or demand decline can be observed.
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What we saw

What is demand forecasting? Necessity of forecasting demand. Factors involved. Types of forecasting

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The thank you slide :) Thank you.

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