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    The Importance of Demand Forecasting

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    broto_waseso
    The document discusses demand forecasting techniques. It notes that forecasting allows companies to minimize deviations between actual and predicted demand by considering influencing factors. Both qualitative and quantitative techniques are covered. Qualitative techniques rely on expert opinions, while quantitative techniques use historical data and mathematical models. Time series models are the most common quantitative technique and examine trends, cycles, seasonality, and randomness in past demand to forecast future demand. The document also briefly defines break-even analysis as calculating the sales level needed to cover fixed costs.

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    The Importance of Demand Forecasting

    Uploaded by

    broto_waseso
    71 views2 pages
    The document discusses demand forecasting techniques. It notes that forecasting allows companies to minimize deviations between actual and predicted demand by considering influencing factors. Both qualitative and quantitative techniques are covered. Qualitative techniques rely on expert opinions, while quantitative techniques use historical data and mathematical models. Time series models are the most common quantitative technique and examine trends, cycles, seasonality, and randomness in past demand to forecast future demand. The document also briefly defines break-even analysis as calculating the sales level needed to cover fixed costs.

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    The document discusses demand forecasting techniques. It notes that forecasting allows companies to minimize deviations between actual and predicted demand by considering influencing factors. Both qualitative and quantitative techniques are covered. Qualitative techniques rely on expert opinions, while quantitative techniques use historical data and mathematical models. Time series models are the most common quantitative technique and examine trends, cycles, seasonality, and randomness in past demand to forecast future demand. The document also briefly defines break-even analysis as calculating the sales level needed to cover fixed costs.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    71 views2 pages

    The Importance of Demand Forecasting

    Uploaded by

    broto_waseso
    The document discusses demand forecasting techniques. It notes that forecasting allows companies to minimize deviations between actual and predicted demand by considering influencing factors. Both qualitative and quantitative techniques are covered. Qualitative techniques rely on expert opinions, while quantitative techniques use historical data and mathematical models. Time series models are the most common quantitative technique and examine trends, cycles, seasonality, and randomness in past demand to forecast future demand. The document also briefly defines break-even analysis as calculating the sales level needed to cover fixed costs.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    1.

    The Importance of Demand Forecasting


    a. A forecast is an estimate of future demand & provides the basis for planning decisions

    b. The goal is to minimize deviation between actual demand and forecast

    c. The factors that influence demand must be considered when forecasting

    d. Buyers and sellers should share all relevant information to generate a single consensus
    forecast
    e. Good forecasting provides reduced inventories, costs, & stockouts, & improved
    production plans & customer service
    2. Forecasting Techniques
    a. Qualitative forecasting : based on opinion & intuition
     Used when data are limited, unavailable, or not currently relevant
     Forecast depends on skill & experience of forecaste& available information
    Four qualitative models used are Jury of executive opinion, Delphi method, Sales
    force composite,Consumer survey
    b. Quantitative forecasting : uses mathematical models & historical data to make
    forecasts
     Time series forecasting : assumes the future is an extension of the past
    Historical data is used to predict future demand
     Cause & Effect forecasting : assumes one or more factors (independent
    variables) predict future demand
    All quantitative methods become less accurate as forecast’s time horizon
    increases
     For long-time horizon forecasts, use a combination of quantitative & qualitative
    techniques
    c. Time series models : most frequently used among all the forecasting models
    Data should be plotted to detect for the following components –
     Trend variations: increasing or decreasing over many years
     Cyclical variations: wavelike movements that are longer than a year (e.g., business
    cycle)
     Seasonal variations: show peaks & valleys that repeat over consistent interval (ie.
    hours, days, weeks, months, seasons)
     Random variations: due to unexpected or unpredictable events such as natural
    disasters
     Time Series Forecasting Models
     Simple Moving Average Forecast : uses historical data to generate a forecast.
    Works well when demand is stable over time.
     Weighted Moving Average Forecast : based on an n-period weighted moving
    average
     Exponential Smoothing Forecast : type of weighted moving average -only two
    data points are needed
     Linear Trend Forecast–trend can be estimated using simple linear regression to
    fit a line to a time series

    3. Break Even Point


    Break-even analysis entails the calculation and examination of the margin of safety for an
    entity based on the revenues collected and associated costs. Analyzing different price
    levels relating to various levels of demand a business uses break-even analysis to
    determine what level of sales are necessary to cover the company's total fixed costs.

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