Demand forecasting is done to predict future demand for product needs to be manufactured or how many clicks I will get on my website. Basically its anticipation of how much market consumption will be for the product or service in both controlled and non-controlled scenarios.
Units demand forecasting predicts future requirement and need of product mostly based on prevailing trends and historic events.
Sales demand forecasting help corporations assess the need of their product and maintain a proper storage inventory. This helps to avoid overstock cost and out of stock problems.
Mainly used by big firms. In a small business, people know my heart from their personal experience how much they need for next month or next year.
Why product demand forecasting is done, because the manager, a business owner would like to accurately estimate what is the potential of business or product. This make understand where our product is standing in the market in comparison to competitor.
Revenue forecasting based on demand will let you figure out what you will sell and when you will sell it. You can have a clear idea of what to produce and when to produce finally when to ship.
So you don’t overproduce to avoid extra inventory cost or under produce – end up losing some sale and most importantly customer. In sum, demand estimation will help you drive sales and reduce cost and optimize inventory.
Comment, what do you think demand forecasting is and how do you do it in your business?