DEMAND FORECASTING

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Group 3
Dilip Chandra M Chandra Shekhar

Mohazin Aslam Vishakha Suri

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Y Vidyadhari
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Introduction
Purpose of forecasting Demand

Steps involved in Forecasting

The methods of Demand forecasting

Introduction
Demand forecasting for products and services are the starting point for all the other planning in operations management. It means estimation of the demand for the good in the forecast period. It is a process of estimating a future event by casting forward past data.

Purpose of forecasting Demand

Short-run forecast
Used for controlling inventory, price policy, setting sales targets.

Long-run forecast
For proper capital planning. Used for expansion of existing units, setting of new unit, planning long-run financial requirements.

Steps involved in Forecasting

Step 1 : Identification of objective Step 2 : Determining the nature of goods under consideration Step 3 : Selecting a proper method of forecasting Step 4 : Interpretation of results

The methods of Demand forecasting

Forecasting Methods

Qualitative Methods

Quantitative Methods

Consumer survey method

Complete enumeration survey

Qualitative Methods

Sales Force opinion method

Sample survey and Test marketing

Experts opinion method

End use Method

Time series

Trend projection

Quantitative Methods

Regression method

Smoothing

Simultaneous equation method

Moving Averages

Exponential Smoothing

Time series Forecasting

Time-series forecasting estimates the future value based entirely on the past and present values. Factors influencing Time Series Data
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Sales(1000s of gallons)

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sales(1000s of gallons)

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Week

Smoothing Methods
Moving Averages : This method uses the average of most recent data values in the time series as the forecast for next period.

3-point moving average (3PMA)

3PMAx = Xt-1 + Xt + Xt+1

 Exponential Smoothing : This method consists of a series of exponentially weighted moving averages.
Ft+1 = Yt + (1 )Ft

Ft+1 Yt Ft

= Forecast of time series for period t+1 = actual value of time series in period t = forecast of time series for period t = smoothing constant(0 1)

Gasoline sales Time series

week 1 2 3 4 sales(1000s of gallons) 17 21 19 23 3PMA #N/A #N/A 19 21 ESF #N/A 17 17.8 18.04

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18 18 20 20 19 19

19.032 18.8256
18.26048 18.60838 18.48671 19.18937 19.35149 18.48119

Gasoline sales Time series and three-week moving average forecast

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15 sales(1000s of gallons) 10 3PMA

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Actual and Forecast time series with smoothing constant = 0.2

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ESF

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15 sales(1000s of gallons) ESF 10 3PMA

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Trend Projection
The linear trend model is

Yt = a + bXt
Yt a b t = Trend value of time series at t = intercept of trend line = slope of trend line = time

Trend representation by a Linear function

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Sales(1000s of gallons)

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sales(1000s of gallons)
Linear (sales(1000s of gallons))

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Week

25

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sales(1000s of gallons) ESF 3PMA

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Linear (sales(1000s of gallons))

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