What are demand forecasting basics and its features

Supply chain analytics certification

Basics of demand forecasting

Demand forecasting is a term used in business planning to test the future demand for products or services. Depending on this assessment, a company further plans its operations, inventory, and supply chain management. Demand forecasters consider all present or past sales figures, experiences, and knowledge to predict what customers will want in the future.

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It is important to note that generating predictions is only the first step toward demand forecasting success. Success depends upon how the forecasts make informed decisions.

These decisions include product pricing, product direction, hiring, and company expansion. Moreover, the prime focus remains on helping the firm avoid overproduction and underproduction. In a nutshell, demand forecasting helps control all the marketing efforts and aspects of a modern business.

Various techniques or methods help in creating demand forecasts. Some ways include the following:

Collective opinion

Market experiment

Regression analysis

Consumer survey

Time series analysis

Delphi method

Each technique has its features that help in achieving different objectives. Therefore, the technique selection depends on the goals and requirements of the forecast.

Features of demand forecasting

Here are a few key features of the demand forecasting technique. Knowing these features can help choose the suitable method:

Time Horizon

The length of time that a forecast needs bears a great impact on the method of forecasting. When the time horizon increases, the probability of marginal forecasting error decreases.

Level of Detail

The forecasting method depends on the level of detail needed in the data. Also, this data must match the focus of the decision-making unit. For instance, a production or sales planning unit will do demand forecasting at an individual level. In contrast, the corporate planning department will need a high-level total forecast by product categories.


The method for demand forecasting can vary with stable times and fluctuation. While stable time requires lesser attention, it is difficult to forecast the periods in greater flux as they need lots of attention. In stable conditions, the ongoing patterns are a good option to continue with and put the past patterns into future use.

Data Pattern

Different forecasting method uses different patterns to identify and assume the data. So, it is best to choose a method that fits the need for data and its underlying relationships.


Improved and accurate forecasting procedure is a costly affair! The expenses also vary from forecasting methods and several costs. So, when a company finalizes its forecasting technique, it should be in sync with the firm's economy.

Ease of Application

The chosen method must be easy to understand and use. Organizations must be able to interpret the result and use it for maximum benefit.

Other factors that affect Demand Forecast

Apart from these above-mentioned method-led features, several other factors affect the organization’s ability to forecast and predict demand. Let’s explore them here:

Customer factor

Both customers and potential customers affect demand. Of course, happy and loyal customers will stick to the product and generate referrals. But in case the business deals with solving service problems and not with the products, then forecasting becomes tricky!

If the competitors bring a better problem-solving approach, then the past sales data and knowledge become meaningless. Therefore, incorporating the marketing department's plans into forecasts is a must.

One-offs events

Any single event can skew the historical data. For instance, if an organization's name features on a TV show or any celebrity endorses it in any event, this one-off event can spike sales for that quarter or year. However, the company cannot consider the same projection in next year's forecasting.

Future uncertainties

Various subtle changes or happenings can change the entire trajectory of demand. Even if the company has the most accurate predictions, the underlying forces are always at play! From unexpected price regulations or a new competitor to a viral video on social media and a global pandemic, certain uncertainties always loom around businesses!

A Career Option in Supply Chains

With the increasing demand for forecasting among businesses to make critical considerations in supply chain management and other marketing management, there is also a growth in their career options. Several Career Certifications For Supply Chain Professionals are available to help learners gain expertise in this scientific exercise of demand prediction. IIT Roorkee Supply Chain Management Course stands out as the best among them!

Futureproof your career with Imarticus Learning

IIT Roorkee Supply Chain Management Course has a design module that trains candidates with cutting-edge experience handling demand forecasting. This Career Certifications For Supply Chain Professionals equip them with the skills to succeed in high-demand job roles like supply and operations planner, demand planner, supply planner, data scientist, etc.

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