CHAPTER 5:-Demand Forecasting

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Definition:-

 

“Forecasting is a projection / prediction made, on the basis of relevant logical assumptions, of the volume likely to be produced, transported and sold”.

 

Forecasting Methods:-

 

1)      Qualitative Methods

 

a)      Jury of executive methods

 

b)      Consumer Survey Method

 

c)       Assessment by Sales Personnel

 

d)      Naïve Approach

 

e)      Delphi Method

 

The Delphi method is a systematic, interactive forecasting method which relies on a panel of expert. The experts answer questionnaires in two or more rounds. After each round, a facilitator provides a small summary of each experts forecasts from the previous round as well as the reasons they provided for their judgments. Thus, experts are encouraged to revise their earlier answers in light of the replies of other members of their panel. It is believed that during this process the range of the answers will decrease and the group will coverage towards the “correct” answer.

 

2)  Time Series Method

 

a)   Simple average: Simple average forecasting uses an average of the most recent period’s sales. The average may contain any number of previous time periods. Generally one, three, four and twelve-period averages are common.

Months Actual Forecast
January 4200
February 4300
March 4350
April 4283

 

b)  Weighted average method: This is more logical since recent data is given more weightage than older data. Averaging over long period can give greater smoothing effects.

Months   Weights

Sales

Weighted Sales
  January    

2

4200

8400

  February    

3

4300

12,900

  March    

5

4350

21,750

  Total    

10

 

43050

Weighted forecast for April

43050

   
   

.  . =

10

   

c)      Exponential Smoothing: Exponential smoothing is a concept implying estimation of future sales on a weighted average of previous demand and forecast levels. The new forecast is an aggregate outcome of older forecasts made adding to it actual level of sales realized.

 

Ft = dt-1+ (1- ἄ) ft -1

 

3)  Casual Technique

 

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