Forecasting is a
prediction of what will occur in the future. It is an uncertain process
that is vital to survival in today’s international business environment.
Rapid technological advances have given consumers greater product diversity
as well as more information on which they make their product choices.
Managers try to forecast with as much accuracy as possible, but that is becoming
increasingly difficult in today’s fast-paced business world.
Qualitative methods are based on:
and Supply Chain Management
of Demand Forecasting
The length of the forecast depends on product market changes and susceptibility to technological changes. The classifications are generalizations. Short, Mid and Long range is all relative to the business and what is being forecast.
Short to Mid-Range forecasts are usually anywhere from daily to up to two years in length. They are commonly used to determine production and delivery schedules and to establish inventory levels.
Long-Range forecasts are generally over two years into the future. They are usually used for strategic planning. Strategic planning determines where the company is headed in the future. It is used to establish long-term goals, plan new products, enter new markets and develop new facilities & technology.Behavior
Demand sometimes behaves in random and irregular ways. Other times it exhibits predictable behavior. The 3 main types of predictable behavior are trends, cycles, and seasonal patterns.
A trend is a gradual, long-term, upward or downward movement in demand. A current trend is the steady increase in sales of personal computers over the past few years.
A cycle is an up-and-down movement in demand that repeats itself over a longer time span. Automotive sales often behave in a cyclical pattern.
A seasonal pattern is a repetitive movement in demand that occurs periodically. Sales of winter sports equipment is seasonal by nature.