Have you experienced the benefits of Demand Forecasting?

A business could face different internal and external risks: a) High competition; b) Change in gover...

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Posted by Dave Food on Jan 16, 2020 8:10:08 PM
Dave Food

A business could face different internal and external risks: a) High competition; b) Change in government laws; c) Failure of technology. d) Labour unrest; e) Inflation or recession.

As a result, most of the business decisions are made under circumstances of risk and ambiguity. Companies can lessen these critical effects by determining the demand or sale prospects for its products and services in future. Here is where Demand forecasting could support your company. 

How can we define a Demand Forecasting approach?

 It is a systematic process that involves anticipating the demand for products and services of an organisation under a set of uncontrollable and competitive potencies.  It is an estimate of sales during a specified coming period based on a proposed marketing plan.

The importance of Demand Forecasting

- Fulfilling objectives – It estimates the current demand for products and services in the market, and move forward to achieve the company goals; align your selling target by units; if they are low or high take corrective action to achieve the set objective.

- Preparing the budget – It plays a crucial role in making a budget by estimating costs and expected revenues and managing funds.

- Stabilising employment and production – It helps to control the production and recruitment activities. Producing according to the forecasted helps in avoiding wastage of resources, to hire human resource according to needs, or the extra labour to fulfil the increasing demand.

- Expanding organisations - It helps in deciding about the expansion of the business; to develop further or cut down plans, depending on the expected demand for products.

-Taking Management Decisions – It helps in making critical decisions, such as deciding the plant capacity, the requirement of raw material, and ensuring availability of labour and capital.

- Evaluating Performance – It helps in making corrective actions to improve the level of demand by boosting the quality of its products or paying more on ads.

- Assisting the Government to coordinate import and export activities, and plan international trade.

Demand Forecasting short and long-term objectives

Short-term Objectives:

Formulating production policyIt helps in closing the gap between the demand and supply of the product; in calculating the option of raw material in future; in the utmost utilisation of resources planned according to forecasts; human resources basics are easily met with this Demand Forecasting.


Formulating price policy: An organisation sets prices of its products according to their demand. For example, if an economy goes into depression or recession phase, the need for products falls.  In such cases, the organisation sets low prices of its products.

Controlling sales – It helps in setting sales targets that act as a basis for evaluating sales performance.  A company make Demand Forecasts for different regions and fix sales targets for each zone accordingly.

Arranging finance - The financial requirements are estimated with the help of Demand     Forecasting to ensuring proper liquidity within the organisation.

Long-term Objectives

Deciding the production capacity to define the size of the plant required for production to conform to the sales requirement of the company.

Planning long-term activities - if the forecasted demand for the organisation's products is high, then it may plan to invest in several expansion and development projects in the long term.

FINAL CONCLUSIONS: Demand Forecasting as a tool for our supply chains reduces risks involved in business activities, provides an insight into the organisation capital investment and expansion decisions. Benefits are many!

Dave Food

Prophetic Technology

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