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Connotations of demand forecasting
Demand forecasting is a combination of two words demand which means to understand what are the requirement for the product and services and other what is forecasting which mean research to fulfill the gap between the demand and supply. To understand the demand forecasting it is better to understand its significance first.
- Accomplish aspirations of the business– The first step is to understand what is the objective of the business. If the objective of the business is cleared by the forecasting team then it becomes easy for them to make the demand curve which tells that what is the requirement of the customer and how to supply them with the proper product and services. If the objective and the purpose of the business is not cleared then it creates a mess in the business.
- Preparing a budget– Another stage is to prepare the budget for the forecasting. Most of the business is having their own forecasting team but most of the companies use to outsource the forecasting team to reduce the cost of the business. Preparing budget comes to know how much a company can spend on research and preparing the methodology for the business.
- Transmittable management judgment– After preparing its budget, it is a responsibility for the forecasting team to tell all the business plan to the management of the company. The director and the senior management of the company have the right to decide whether to continue with the plan or not.
- Performance evaluation– After arriving at the final decision the responsibility of the forecasting team and management is to check whether the forecasting has been successfully performed or not.
Various types of demand forecasting
There are majorly two types of demand forecasting that are based on the economy and based on the time period. Some of the subtypes of these demand forecasting are as follows:
- Macro-level forecasting– This type of forecasting used to cover the home type of population living in a particular area or in a region.
- Industry level forecasting– This type of forecasting used to be conducted within the industry who are selling a similar type of product and services to the customer.
- Firm-level forecasting– This type of forecasting is conducted within the premises of a particular form. For instance, forecasting took place in Coca-Cola, in Pepsi, etc.
- Abbreviated forecasting– This is also known as short term forecasting which means research is conducted on a particular topic or a particular product within an industry. This type of forecasting useful it took a minimum of 6 months.
- Long term forecasting– This is completely research-based and analysis based forecasting which took a year or more to arrive at a decision whether to continue with the product or to move on.
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