Demand Forecasting is the business process that involves calculating future demands for products and services that consumers will buy. It also helps predict the quantity of products or services that must be manufactured and shipped. It is an important tool for managing a sustainable business, whether it comes from customer surveys, general predictions, market trends, or in-depth economical analysis (Hartman, 2015). Demand forecasts are necessary since the basic operations process, moving from the suppliers' raw materials to finished goods in the customers' hands, takes time.
There are many advantages that come with demand forecasting, if done accurately, such as having adequate supply – business has to make sure it has enough supply of a product/service to meet the demands. If there is not enough supply, it can lead to lost of sales as customers buy from a competitor and if there is more supply than demand then the business’ revenue will be effected because of the expenses for labour, production, and shipping (Hartman, 2015). Also, managing human resources – this allows the business to manage human resources more efficiently by looking at information that gives managers an idea of how many workers they will need, and where their labour needs will be the highest (Hartman, 2015). For example, retail stores higher more staff in September to December because of Black Friday and Christmas/Boxing Day.
However, there can be many challenges that businesses may overcome when doing forecasting. A few obstacles that may affect the forecast accuracy performance can be: * Economic pressure – when a society or country is facing undesirable economic times, such as during a recession. Many customers will cut costs by shopping less and saving their money. * Poor communication – this can include having poor communication with the supplier/manufacturer about the