Introduction:
Forecasting is a technique used to predict future events and outcomes for today’s actions. It helps the organization to plan accordingly and to make their plans future-proof.
Demand forecasting is yet another way of having an estimate of buyers’ intent in the future about their product.
The organization’s motive is to create a product that suits their targeted audience. customers tend to demand certain products per their needs.
An organization with a plan to survive and to earn want their product to meet the customer requirements.
Customer demand shows no pattern as it changes with certain factors like seasonality, taste and preferences, price of substitute goods, and many more.
For instance, demand for raincoats will be higher in the rainy seasons than in summers.
One of the prominent factors for customers’ demand is price.
Price and demand are inversely related to each other.
The more the price is, is less likely it is that a large audience will buy the product. Companies should consider the price sensitivity e of their targeted audience before pricing
Organizations need to have a close eye on the demand to act.
Customers demand certain items, and companies adjust their production as per the buyers’ willingness to buy that product.
Organizations take care of demand in the present time and forecast demand from the future to increase or decrease production to avoid any surplus or deficit of stocks in the market.
Forecasting is the practice of calculating the predictions that can be used in the decision-making process. These estimates can be long-term for the overall demand and short-term for any particular product.
Methods for forecasting Demand:
Forecasting demand can be of three parts:
- Qualitative techniques
- Time-series techniques
- Casual techniques
Qualitative techniques:
Qualitative techniques are techniques that are not based on any mathematical models but are more inclined towards judgments and opinions. The opinions can be made on the surveys of scientific opinions and intuitive predictions about future events.
Time-Series techniques:
The technique assumes that the previous data that is already available holds a significant value. Where the data is incorrect is very rare and does not create much of an impact.
Casual techniques:
The demand depends upon various factors such as price, substitute goods, complementary goods, taste & preferences, competition, etc.
Organizations must analyze the variable affecting the demand for their product.
It creates a relation between two or more factors and makes the organization able to understand their influence on each other.
Flexible Product as per the demand:
Flexibility plays a significant role in providing the best possible product to their customers.
Flexibility helps to cater to the audience for their satisfaction.
It helps the organization increase its market share to earn profits and future-proof its business.
Production-Based flexibility is shifting the production of goods from one product to another.
Most organizations have a wide range of product lines. When a certain product is doing better than others in the portfolio of product, it makes a lot more sense to have the=is shift in production towards a product that n more in demand in recent times.
It can be helpful for the business to produce different products in small batches.
For Example, A bakery business catering to different products like cakes, biscuits, donuts, and related products needs certain flexibility.
Their bakery can get the demand for different products from different customers even within a day.
An organization must know how to increase and decrease its volume of production as per the market condition.
It is not cost-effective to produce a higher volume of product, whose demand fluctuates with time. Organizations having these kinds of products need to have their resources flexible.
Fluctuating demand requires the production also have a flexible approach to avoid any extra stocks.
Exceptions to the obvious:
Production of the goods is a significant aspect of inventory management.
Consistent production is the requirement of the organization.
Hence it is advisable to have a regular production cycle and store the goods for the right time.
Storage of goods can be necessary for an organization to avoid any inconsistency in production.
For Example, The Demand for heaters will only be high in the winter. The organization should produce heaters throughout the year and keep them in the stocks to reduce the burden.
The business operates in an uncertain environment.
Organizations maintain adequate amounts of inventory to battle this problem.
It helps the firm to utilize favorable conditions and to get prepared for adverse situations.
For instance, the stock of raw materials is crucial for the sudden rise in the price of the raw material inventory of finished goods is necessary to fulfill the sudden outbreak in demand for the product.
Inventory planning helps the organization to have a plan for the future.
