Demand forecasting

Demand forecasting is the art and science of forecasting customer demand to drive holistic execution of such demand by corporate supply chain and business management. Demand forecasting involves techniques including both informal methods, such as educated guesses, and quantitative methods, such as the use of historical sales data and statistical techniques or current data from test markets. Demand forecasting may be used in production planning, inventory management, and at times in assessing future capacity requirements, or in making decisions on whether to enter a new market

Demand forecasting is predicting future demand for the product. In other words, it refers to the prediction of probable demand for a product or a service on the basis of the past events and prevailing trends in the present.

Methods that rely on qualitative assessment

Forecasting demand based on expert opinion. Some of the types in this method are,

• Unaided judgment
• Prediction market
• Delphi technique
• Game theory
• Judgmental bootstrapping
• Simulated interaction
• Intentions and expectations surveys
• jury of executive method

Methods that rely on quantitative data

• Discrete Event Simulation
• Extrapolation
• Group method of data handling (GMDH)
• Reference class forecasting
• Quantitative analogies
• Rule-based forecasting
• Neural networks
• Data mining
• Conjoint analysis
• Causal models
• Segmentation
• Exponential Smoothing Models
• Box-Jenkins Models
• Hybrid Models

Some of the other methods

a) time series projection methods this includes:

• moving average method
• exponential smoothing method
• trend projection methods

b) causal methods this includes:

• chain-ratio method
• consumption level method
• end use method
• leading indicator method

See also

• Supply and demand
• Demand chain
• Calculating demand forecast accuracy
• Inventory § Principle of inventory proportionality
• Reference class forecasting

References

• Milgate, Murray (March 2008). "Goods and commodities". In Steven N. Durlauf and Lawrence E. Blume. The New Palgrave Dictionary of Economics (2nd ed.). Palgrave Macmillan. pp. 546–48. doi:10.1057/9780230226203.0657. Retrieved 2010-03-24. • Montani, Guido (1987). "Scarcity". In Eatwell, J. Millgate, M., Newman, P. The New Palgrave. A Dictionary of Economics 4. Palgrave, Houndsmill. pp. 253–54.