Question

Explain the information needed by a firm to forecast demand. Describe the forecasting technique and how they are used to determine demand in a firm's operations. Identify and describe logistics software that provides forecasting information to a firm.

Answer 1

Depending on the industry, its competitiveness, price sensitivity of the products, etc. there may be requirement for different types of information for demand forecasting. However, some of the commonly used factors that are necessary for an effective forecasting system are

Historical demand data

Relevant economic factors (inflation, price sensitivity, etc.)

Seasonal factor data

The key to using these data is in the mapping of the various events with the historical demand data. Various firms approach it in different ways. However, commonly used approach is to map a trend information. Then check the seasonal factors and their impact on the trend. Next, the firms may choose to identify the economic factors and then check their impact. Based on these they can anticipate the factors and their influence. This basically describes the econometric method of forecasting. In a more simple approach firms can use trend projection, Holt-Winter method, or even moving average methods. If the firm chooses to go further into a non-quantitative territory then they can use qualitative methods such as expert opinion, Delphi method, etc.

Software that can be used are many. Some of the notable ones are Oracle NetSuite, Vanguard Predictive Planning, etc.