Steps In Demand Forecasting

1. Determining the objectives:

The first step is to carefully consider the objectives of sales forecasting.

2. Period of forecasting:

Decide whether the forecast will be short-term or long-term.

3. Scope of forecast:

Determine if the forecast is for products, specific areas, entire industries, or at the national/international level.

4. Sub-dividing the task:

Divide the forecasting task into homogeneous groups based on product, area, activities, or consumer segments. Aggregate the forecasts from all groups.

5. Identify the variables:

Identify and weigh the different variables or factors that affect sales.

6. Selecting the method:

Select an appropriate sales forecasting method based on relevant information, forecasting purpose, and required accuracy.

7. Collection and analysis of data:

Collect, tabulate, analyze, and cross-check necessary data using statistical or graphical techniques. Draw necessary conclusions.

8. Study of correlation between sales forecasts and sales promotion plans:

Review sales promotion plans such as advertising and personal selling to ensure reliability of the forecast. Study the correlation between sales forecasts and these plans.

9. Competitors activities:

Study competitors’ activities, policies, programs, and strategies as they significantly impact sales volume.

10. Preparing final sales forecasts:

Review preliminary forecasts and make necessary adjustments to arrive at final sales forecast figures.

11. Evaluation and adjustments:

Use final sales forecast figures as a basis for company operations in the next period. Regularly evaluate actual sales performance (monthly, quarterly, half-yearly, yearly) and revise forecast figures based on actual performance and challenges encountered. Review and rectify actual performance at the end of the forecast period to inform demand forecasting for the next period.