Demand forecasting

1. DEMAND ANALYSIS
AND FORECASTING
TOPIC:
PRESENTATION

2. OBJECTIVE
IMPORTANCE
DETERMINANTS
REAL LIFE EXAMPLES
METHODS FOR CALCULATION
DEMAND ANALYSIS
OBJECTIVE
IMPORTANCE
DEMAND FORECASTING
SHIPBOB: A TESTIMONY
TABLE OF CONTENT

3. To study the relationship of demand
analysis and forecasting which can further
be analyzed for measuring the forces that
influence sales volume.
OBJECTIVE
DEMAND ANALYSIS AND FORECASTING

4. First of all , let's
understand
What Is A Demand ?
In economics, the demand for a commodity refers to
both the desire to purchase the commodity as well
as the ability to pay for it .
"Desire backed by adequate purchasing power"
In competitive market conditions, there is a need to
take correct decision and make planning for future
events related to business like a sale, production,
etc.
The effectiveness of a decision taken by business
managers depends upon the accuracy of the
decision taken by them
Demand plays a vital role in the decision making of
a business.

5. Demand analysis is one of the most important aspects of managerial
economics and it is studied in great detail.
Demand analysis begins by
understanding the various types
of demands which exist in the
market. So let's take a quick
review of types of market
demands.
Individual demand
Household demand
Market demand
Types of Demand

6. Factors
Influencing
The
Customer
Demand
Life Cycle
Price of the commodity
Income of the consumer
Taste and preferences of the consumer
Price of Relative goods
Expectations about future prices of the product
Advertisements
Taxation
Other factors

7. Introduction
To
Demand Analysis

8. What Do You Mean
By Demand Analysis?
Demand analysis is the process of understanding the
customer demand for a product or service in a target
market.
The success of any business largely depends on sales,
and sales depend on market demand behaviour.
Therefore, Market demand analysis is one of the crucial
requirements for the existence of any business
enterprise.

9. Why do we
need Demand
Anlysis?
To determine the target markets
To determine the viability of
investing in each of these
markets.
To estimate expected profits to
expand the business operations.
For a better understanding of the
high-demand markets for the
company’s offerings

10. STEP 1: Market identification
STEP 2: Business Cycle
STEP 3: Product Niche
STEP 4: Evaluate Competition
HOW TO DO THE
MARKET DEMAND
ANLYSIS?

11. Introduction To
Demand Forecasting

12. Demand forecasting is a field of predictive analytics which tries to understand
and predict customer demand to optimize supply decisions by corporate supply
chain and business management.
Therefore, in simple words, we can say that after gathering information about
various aspect of the market and demand based on the past, an attempt may be
made to estimate future demand. This concept is called forecasting of demand.
It is a technique for estimation of probable demand for a product or services in
the future. It is based on the analysis of past demand for that product or service
in the present market condition.

13. OBJECTIVE Capital investment
Expansion decision
Formulation of suitable pricing
Advertisement strategies.
To provide reasonable data
for the organization’s

14. SIGNIFICANCE OF
DEMAND FORECASTING
Preparing your budget
Planning and scheduling production
Storing Inventory
Developing a pricing strategy

15. (i) Active Forecast
(ii) Passive Forecast
Forecasts can be broadly classified
into:
(i) Macro-level forecasting,
(ii) Industry- level forecasting,
(iii) Firm- level forecasting
(iv) Product-line forecasting.
At different levels forecasting may
be classified into:
From the view point of ‘time span’,
forecasting may be classified into
(i) Short term demand forecasting
(ii) long term demand forecasting.

16. Let's talk about some real
life examples for the better
understanding!

17. A grocery store looks at sales
trends from last year’s
Thanksgiving week to prepare
adequate inventory levels for
the upcoming season. They
look at sales leading into that
week last year for seasonal
products like turkeys,
cranberries, and mashed
potatoes. It was a great
holiday sale for them.
EXAMPLE 1

18. But eight months ago, a competing grocery store opened
four blocks away, so they’re unsure how Thanksgiving
demand will be affected and if local customers will buy
ingredients from their competitor.
At the same time, a lot of families continue to move into the
neighborhood, and they’ve still grown an average of 1%
month-over-month since the competing chain opened.
Now the question arises, on what basis the grocery store will decide
for it's sale improvement? Let's have a look.

19. MORE ADS
They plan to launch a few more
ads than last year through
channels that have proven a
good ROI for them in the past
BEST DEALS
They also plan to offer some
new deals to position
themselves as the go-to
Thanksgiving destination.
THE
THANKSGIVING
DESTINATION
Their calculations project
a 5% increase in sales
from last year.

20. An up-and-coming direct-to-
consumer cosmetics brand is
growing quickly. Currently,
they are selling 10,000 orders
per month. Based on their
past sales data, upcoming ad
campaigns, and general
market conditions in the
industry, they plan to increase
the order quantity per month
in the upcoming years.
EXAMPLE 2

21. In the past, the brand relied on its historical data alone to decide the
products and quantity to manufacture and deliver to its customers.
Also, they wanna be sufficient with their production in order to avoid
the risk of shortages.
As a result, the company ended up overproducing the quantity and
suffered loss of thousands of dollars.
Now the question arises, what is the planning for this time?
Let's have a look.

22. To avoid the loss this time, the company
incorporated factors like consumer
sentiment, retail sales, along with
employment rates, to identify markets
and demographics.
It began building its own market demand
forecasting models on a weekly basis.
As a result, executives could make better
staffing and purchase decisions for raw
materials that were needed to produce
their beverages.
The company was able to avoid over-production
with accurate demand forecasts.

23. METHODS OF
DEMAND
FORECASTING

24. A panel of experts are appointed
to produce a Demand Forecast.
After the initial forecasting round,
each expert reads out their
forecast and in the process, each
expert is influenced by other
experts. A consequent forecast is
again made by all experts and the
process is repeated until all
experts reach a near consensus
scenario.
The Sales Manager asks for inputs
of expected demand from each
Salesperson in their team. Each
Salesperson evaluates their
respective region and product
categories and provides their
individual customer demand.
Eventually, the Sales Manager
aggregates all the demands and
generates the final version of
Demand Forecast
In market research
technique, customer-
specific surveys are
deployed to generate
potential demand. Such
surveys are generally in the
form of questionnaires
that directly seeks
personal, demographic,
preference and economic
information from end
customers.
SALES FORCE
OPINION
MARKET
RESEARCH
QUALITATIVE METHODS
THE DELPHI
TECHNIQUE

25. It can be effectively deployed for
businesses with a large sales data
history of typically more than 18 to
24 months. This historical data
generates a “time series” which
represents the past sales and
projected demand for a specific
product category under normal
conditions by a graphical plotting
method or the least square
method.
This method utilizes autoregressive
integrated moving-average and
complex mathematical equations,
to establish relationships between
demand and factors that influence
the demand. An equation is
derived and fine-tuned to ensure a
reliable historical representation.
Finally, the projected values of the
influencing variables are inserted
into the equation to generate a
forecast
Barometric technique of
Demand Forecasting is
based on the principle of
recording events in the
present to predict the
future. This is
accomplished by analyzing
the statistical and
economic indicators
ECONOMETRIC
FORECASTING
BAROMETRIC
TECHNIQUE
QUANTITATIVE METHODS
TREND PROJECTION
METHOD

26. Calculating the accuracy of
supply chain forecast.
Calculating forecast error.
Calculating demand forecast
accuracy is the process of
determining the accuracy of
forecasts made regarding
customer demand for a
product. .
In order to maintain an
optimized inventory and
effective supply chain,
accurate demand forecasts
are imperative.
CALCULATING DEMAND
FORECAST ACCURACY

27. A TECH ENABLED 3PL
SHIPBOB
A Testimony of demand forecasting

28. ABOUT
SHIPBOB
A shipping software program
involved in the business of
transporting, supplying and
delivering goods.
A tech enabled 3PL
What areas can you improve on? What does your company lack?
What things do your competitors do better than you?
Weaknesses
Opportunities
Orders are automatically sent to our
warehouses,
where inventory is picked, packed, and
shipped to your customers.
Help producers to optimize for time and
cost

29. HOW
IT
ACTUALLY
WORKS?
STEP 2
We store your inventory securely in our fulfillment centers
STEP 1
Connect your store and send us your products
STEP 3
Your customer places an order on your store
STEP 4
We pick, pack, and ship the order to your customer fast

30. HOW IT MAKES DEMAND
FORECASTING EASIER?

31. ShipBob has a network of fulfillment
centers across the United States, allowing
ecommerce businesses to store their
inventory.
ShipBob automatically pick, pack, and ship
orders as soon as they are placed.
ShipBob also has proprietary software
with advanced analytics and distribution
metrics that inform business decisions.

32. ShipBob’s
analytics
show you
these things
at a glance:
How quickly products are selling
Which items are slow-moving
How many days of inventory you have until you are
expected to run out
How your current demand compares to previous time
periods
How your sales are affected by different seasons and
months
Your best selling items and the percentage of your
business they account for
how much you are spending on shipping, and the
average order amount that customers are spending at
your store

33. Conclusion Forecasting is an integral part of demand
management since it provides an estimate
of the future demand and the basis for
planning . It helps businesses make
informed decisions that affect everything
from inventory planning to supply
chain optimization.
With customer expectations changing
faster than ever, businesses need
appropriate forecasting methodology for
planning and utilization of resources as
per the market demand.

34. BIBLIOGRAPHY
https://en.wikipedia.org/wiki/Demand_forecasting
https://blog.arkieva.com/demand-forecasting/
https://www.yourarticlelibrary.com/economics/demand-forecasting-its-meaning-types-techniques-
and-method-economics/28607
https://www.shipbob.com/blog/demand-forecasting/
https://www.ukessays.com/essays/business/introduction-to-demand-forecasting-
businessessay.php#:~:text=Conclusion%3A,and%20making%20sound%20business%20decisions.

35. Thank You!
OPEN FOR FEEDBACK AND QUESTIONS ;)

36. Dr. Shailja Khanduri
SUBMITTED TO:
SUBJECT: MANAGERIAL ECONOMICS
COURSE : MIB (SEMESTER 1)
Kavita Mishra
Soumya Singh
Ayesha Ahmad
Akshat Sharma
S U B M I T T E D B Y :