Speaker 1: In this video, you are going to learn Demand Forecasting. Topics I have discussed are What is Demand Forecasting? Steps in Demand Forecasting, Demand Forecasting Methods, and Why is Demand Forecasting Important? Let's start the video. Demand Forecasting is the systematic process to evaluate future demand for a specific product. It allows you to examine the sales scientifically over upcoming weeks, months and years, so that you know exactly how much stock to order and hold at any given time period. With the help of Demand Forecasting, businesses can enhance inventory by predicting future sales from analyzing past sales data, to make proper business decisions about everything from inventory planning and warehousing needs, to running flash sales and meeting customer demands. We can define Demand Forecasting as the method of using historical sales data to evaluate future customer demand. Steps in Demand Forecasting. Step 1. Identification of Business Objectives. Initially, we should know about the aim of forecasting. Demand Forecasting should have a clear purpose. Evaluation of factors like composition and quantity of demand for goods, cost to be quoted, sales planning and inventory control, etc. done in the identification stage. Step 2. Determining the Nature of Goods. Different goods have their own special demand. For example capital goods, consumer durables, and non-durables goods. We should estimate in which category our goods fall. Step 3. Determining the Time Period. Based on the target set, the Demand Forecast can either be for the short term, say for the next 2 to 3 years, or a long term. While forecasting demand for a short term, we can assume many determinants of demand to remain unchanged, or do not change significantly. But in the long term, the elements of demand may transform. Thus, it is necessary to define the time. Step 4. Making a Choice of Method of Forecasting. After setting of aim and time perspective, the method for implementing the forecast is selected. There are various methods of demand forecasting categorized under survey or qualitative methods, and statistical or quantitative methods. The forecaster must choose the method that best suits his requirement. I have discussed the different methods of forecasting later in this video, so watch the video till the end. Step 5. Collection and Adjustment of Data. After deciding the method, the next step is to collect the needed data, which may be primary or secondary or both. The primary data are the first hand data that no one has collected before, while the secondary data are the data that are already available. Last step is Estimation and Interpretation of Results. After collecting the required data, we finalize the demand forecasting method. The last step is to evaluate the demand for the predefined period. Generally, the estimates appear as equations, and the result is interpreted and represented in an easy and accessible form. At last, you require to comparing what you predicted, to actual sales, which can help you adapt your next forecast. Now come to, Demand Forecasting Methods. There are two basic types of Demand Forecasting Methods. Qualitative Methods and Quantitative Methods. Examples of Qualitative Methods are, The Delphi Technique, Sales Force Opinion, Market Research. Examples of Quantitative Methods are, Trend Projection Method, Barometric Technique, Econometric Forecasting Technique. Let's discuss each technique separately. The Delphi Technique. A group of experts is appointed to produce a demand forecast. Each expert is suggested to generate a forecast of their elected specific segment. After the initial forecasting round, each expert reads out their forecast, and every expert influences another expert. A consequent forecast is again produced by all experts, and the process is repeated until all experts achieve a near agreement scenario. Sales Force Opinion. The sales manager asks for inputs of predicted demand from every salesperson in their team. Each salesperson evaluates their respective region, product categories and serves their individual customer demand. Eventually, the sales manager aggregates all the demands, and sets up the final version of the demand forecast, after management's opinion. Market Research. In the Market Research Method, customer-specific surveys are used to generate possible demand. Such surveys are generally question-based that directly seek personal, analytical, preference, and economic information from end customers. This type of technique could be useful for products that have little to no demand history. Trend Projection Method. We can effectively deploy the trend projection method for businesses, with a large sales data history of typically over 18 to 24 months. This historical data sets up a time series, which illustrates the past sales and projected demand for a specific product category under normal conditions, by a graphical plotting method or the least square method. Barometric Technique. The barometric technique of demand forecasting is based on recording events in the present, to forecast the future. Forecasters use statistical analysis like leading series, concurrent series, or lagging series to make the demand forecast. Econometric Forecasting Technique. Econometric forecasting uses auto-regressive integrated moving average, and complex mathematical equations, to create relationships between demand and factors, that affect the demand. An equation is developed, and fine-tuned to assure a reliable historical representation. Finally, the projected values of the influencing variables are introduced into the equation, to make a forecast. Let's move on to why is demand forecasting important? Without a thorough understanding of demand, businesses aren't capable of making the right decisions about marketing spend, production, staffing, and more. Although it will never be 100% accurate, forecasting demand can help you improve production lead times, increase operational efficiencies, save money, launch new products, and provide a better customer experience overall. If you want to know what is forecasting, check the video in the I button. If you want to read in details about demand forecasting or download the PDF, go through the link in the description. You can support my work by liking the video and subscribing to my channel.