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DEMANDFORCASTING
Production is often made in anticipation of demand.
ANTICIPATION of demand implies demand forecasting.
Demand forecasting means expectation about thefuture course of the market demand for a product.
Demand forecasting is based on the statistical data
about past behaviors and empirical relationships ofthe demand determinants .
Demand forecasting gives a reliable approximation
regarding the possible outcome ,with a reasonableaccuracy. It is based on the mathematical laws ofprobability
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LEVELS OF DEMAND FORECASTIONING
MICRO LEVEL: It refers to the demand
forecasting by the individual business firm for
estimating the demand for its products.
INDUSTRY LEVEL: It refers to demand
estimate for the product of the industry as thewhole. It relates to the market demand as a
whole.
MACRO LEVEL: It refers to the aggregatedemand for the industrial output by the nation
as the whole.
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THE SIGNIFICANCE OF DEMAND
FORECASTING
PRODUCTION PLANNING
SALES FORECASTING
CONTROL OF BUSINESS
INVENTORY CONTROL
GROWTH AND LONG TERM INVESTMENT
PROGRAMS
STABILITY
ECONOMIC PLANNING AND POLICY MAKING
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TYPES OF DEMAND FORECASTING
SHORT TERM FORECASTING
Relate to a period not exceeding a year.
Usually day to day information's which are
concerned with tactical decisions under the givenresource constraints ; as in te short run, the
available resource scale of operations ,etc, are
fixed or unalterable, by and large.
In short term forecasting a firm is primarily
concerned with the optimum utilization of its existing
production capacity.
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LONG TERM FORECASTING
Refers to the forecasts prepared for long periodduring which the firms scale of operations or the
production capacity may be expanded or reduced.
Long term forecasting permit alternatives in the scale ofproduction differ from industry to industry and firm to firm.
Relates to in formations which are vital for undertaking
strategic decisions of the business pertaining to its
expansion or contradiction over a period of time.
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LONG TERM FORCASTING SERVE THE PURPOSE
BUSINESS PLANNING:-
Long demand potential will provide the required guidelines for
Planning of a new business unit or for the expansion orOf the exiting one. Capital budgeting by a firm is based
on the long term demand forecasting.
MANPOWER PLANNING:-
It is essential to determine long-term sales forecast foran appropriate manpower planning by the firm in view of its
long term growth and progress of the business .
LONG-TERM FINANCIAL PLANNING:
In the view of the long and sales forecasting and the production
planning, it becomes easier for the firm to determine
its long-term financial planning and programmers for
raising the funds from the capital market.
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SHORT TERM FORECASTING SERVE THE
FOLLOWING PURPOSE
EVOLVING SALES POLICY
DETERMING PRICE POLICY
EVOLVING A PURCHACE POLICY
FIXATION OF SALES
TARGETS
DETERTERMING SHORT-TERM FINANCIAL
PLANNING
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Washington Policy and Analysis with the support of theAmerican Gas Foundation conducted the study "Fueling theFuture: Natural Gas & New Technologies for a Cleaner 21st
Century"
In 2020, emissions of carbon dioxide, the primary"greenhouse" gas, would be reduced by an estimated 930
million tons annually if the increased use of natural gasprojected in this study is achieved.
The use of natural gas would also reduce the United States'dependence on imported oil by an estimated 2.6 million barrelsper day
Further, due to the high quality of the natural gas system andnatural gas appliances, energy consumption is 6 percent lower
in the accelerated scenario than in the current scenario
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FORECASTING METHODS
SURVEY METHODS STATISTICAL
METHODS
Customer
survey
method
Collective
opinion
method
Reasoned
opinion
method
Market
experiments
method
Time series
analysis
Regression
analysis
Graphical
method
Semi-
average
method
Moving
average
method
Least
square
method
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DEMAND FORCASTING IN E-BUSINESS
In the economy of fierce competition on a global basis., The consumeror any potential buyer has access to information any time of the dayand more product choices than ever.
IBM has recently announced the next phase of adopting today'scomputing resources and Global connectivity technologies to run
an e-business on demand:
An on-demand e-business is embodied with end-to-end integratedprocesses across the entire company as well as with key partners,
suppliers and customers such that the value chain as a whole can
quickly respond to changes in demand, supply, customer preferences,market opportunity and competition-business technology to derivea number of benefits new revenue sources, better delivery ofproducts, and significant cost savings.
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New Opportunities and Challenges in Demand
Forecasting
To exploit an opportunity, we need to be aware of thevalue of the different types of information and thesubsequent exploration of it.
1) Information on demand throughput.
2) Information on selling price and product promotion.Changes in the selling price and the presence of product
promotions are known to have a significant effect ondemand in many industries.
3). Information on product life cycle
4) Information on the marketplace
5) Information on consumers
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A MEANS TO AN END: The Profit and Revenue
Perspective
Improve the efficiency of the business includingthe bottom-line profit.
Analysis of average demand
Need for low profit productsGuidance to where and how resources forforecasting should be placed to maximize profit.Without a perspective of profit versus supply
given the demand uncertainty, it would bedifficult for the forecaster to know what isimportant to measure, what metric is needed,and what performance target to shoot for.