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Demand forecasting is the techniques which estimate the possible demand for a product or services in the future. The whole analysis is based on the past demand for a product or service which exists in the current market condition. The process of forecasting demand must be done on the basis of facts and events. Therefore, it can be said in simple words that once the information is gathered on various aspects of the market and demand on the basis of past, an effort must be taken to estimate the demand for future. This entire process is considered as Demand forecasting.
An organisation has to face numerous internal as well as external risks such as failure of technology, high competition, labour unrest, recession, inflation and alteration in the government laws. Therefore, the majority of the business decisions in an organisation are taken under risks and uncertainty conditions. Any organisation can reduce the negative effects of risks with the help of identifying the demand for the products and services in the upcoming years. Demand forecasting is a process which is systematic in nature and consists of the anticipation of demands for the product and services which an organisation deals in under the set of forces which are competitive and uncontrollable in nature.
There is a very crucial role played by demand in every business as it assists the organisation in lessening risks which are involved in the business activities and further help in making vital business decisions. Following are the points which prove the significance of demand forecasting:
The process forecasting demands help in fulfilling the objectives which have been pre-decided by the organisation. It usually tends to estimate the current demand for the products in the market and then decide on moving ahead to accomplish goals.
Demand forecasting has a crucial role in deciding the budget with the help of estimating costs and expected revenues.
The production of products as per the forecasted demand is advantageous in evading resource wastage of an organisation. This makes it easier for the organisation to hire human resources as per the requirement.
Demand forecasting is helpful in making decisions about the business expansion of the organisation. If the demand for the product is higher, the organisation may expand in future.
It is helpful in taking critical decisions related to planting capacity, the requirement of raw material and availability of capital and labour.
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