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Hewan N Teklu
BUSI 620-001
March 15, 2016
Professor Andrew Light
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DEMAND FORECASTING
INTRODUCTION
Forecasting is a method of estimating the future demand and it provides the
foundation for formulating business plans. As all firms’ experiences an unpredictable and
unanticipated future, hence, there can be some chances of error between the actual and
forecasted value of demand. Hence, the objective of a suitable forecasting strategy is to
minimize the margin of error between the actual and expected value of demand. As
forecast is an estimate about the future value, therefore, determinants of demand and their
influence, and moreover whether these determinants will be operational and effective in
future should all be considered while formulating an accurate forecast. Moreover, all
applicable information should be shared between the buyers and sellers in order to create
a single concise and accurate value for the forecast which would help in making reliable
decisions related to demand and supply. The advantages of sound forecasts are lower
level of inventories, reduction in stock outs, smooth plans related to production, reduction
in costs and enhanced and better quality services for customers (Wisner, Tan, & Leong,
2008).
MATCHING SUPPLY AND DEMAND
The notion of supply matching with the demand condition is simple. It simply
illustrates what are the requirements of the consumers and in order to meet their demands
and needs, inventory investment is required. Demand forecasting is used in a number of
decision policies like pricing decisions, in evaluating future supplies and decisions related
to entry into the market, etc.
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In the present times, there has been a complete change in the business setups and their
requirements. Now the customers are more focused and demand oriented than ever. The
complete buying format has changed into pull behavior where the suppliers are more
concerned about the customers’ demands, needs and requirements. Now, if the supplier is
unable to meet the requirements like timely delivery, required quantity, etc. then retailers
easily switch to other supplier as there are number of suppliers in the market (Wisner,
Tan, & Leong, 2012).
One of the foremost objectives of supply chain management is to accomplish the
customer’s demands through a planned and efficient way by utilizing the resources in
most suitable and appropriate method. There prevail various methods and aspects of
