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Poor or absent forecasting can lead to bad decisions. With that in mind, demand forecasts are crucial for companies, as they affect inventory planning, logistical planning, production planning, cash flow planning, hiring decisions, purchasing decisions, among others. These predictions can also be used as inputs for the sales and marketing teams to create insights into demand generation and organize their actions.īusinesses, in general, need to make forecasts about their products to prepare an effective plan in both short and long term. Managers and decision makers utilize demand forecasts on their daily activities. It is also useful for the tactical and strategic process of companies. Thus, the predictions are of importance, as they enable managers to plan more assertive activities toward the strategic goals of the business. How important is Demand Forecasting?ĭemand Forecasting is an important activity that influences companies from different segments, such as: retail, consumer goods, pharmaceutical industry, automotive electronics, heavy machinery among others.ĭemand forecasting is used for business planning, as every plan involves estimates about this type of forecast. Therefore, a good demand forecasting process needs to produce good estimates. Forecasting results aid businesses in planning their decision making. It is important to note that predictions are not targets, but rather estimates of what will happen. Forecasts can be generated through mathematical models, which use historical data by qualitative methods, such as management experience or expert opinion or even a combination of both.Some of the questions we seek to answer when making such predictions are “when”, “where”, and “how much”. This is done with existing data that’s been collected and stored. 5 Evolution of demand forecast throughout historyĭemand forecasting, as the name already tells, is the process for obtaining estimates of a future demand of products and services.4 What are the main categories of demand forecasting methods?.3 How are forecasts horizons classified?.

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