OPERATION FORECASTING METHODS
OPERATION FORECASTING METHODS
All business and industrial activities
revolve around demand and sales and their future planning. Forecasting refers
to the act of making a statement about the future. It is estimating the future
event by casting forward past data.
Method
and type of forecasting
1)
Demand
forecasting
2)
Sales
forecasting
DEMAND FORECASTING
The demand is uncertain, production, cost, revenue, profit etc. are also
uncertain. Through forecasting it is possible to minimize the uncertainties.
Forecasting simply refers to estimating or anticipating future events. It is an
attempt to foresee the future by examining the past. Thus demand forecasting
means estimating or anticipating future demand on the basis of past data.
Type
of demand forecasting
1) Collective opinion method:
Under this
method the salesmen estimate the expected sales in their respective territories
on the basis of previous experience. Then demand is estimated after combining
the individual forecasts (sales estimates) of the salesmen. This method is also
known as sales force opinion method
2) Delphi method:
Under this method, demand is
estimated on the basis of opinions of experts and distributors other than
salesmen and ordinary consumers. This method is also known as Experts' opinion
method.
3) Trend projection method: Future sales
are based on the past sales, because future is the grand-child of the past and
child of the present. Under the trend projection method demand is estimated on
the basis of analysis of past data.
SALES
FORECASTING
It means estimating the future sales
either in terms of value or in terms of units of a product or several products.
It is related to a fixed period of time. Mostly it is made for a year. Sales
forecast implies development of an effective system to estimate sales for the
specified period.
Sales
forecasting techniques
1)Users expectation techniques
the actual users of the
product are contacted directly and are asked about their intention to buy the
company’s products in an expected time, usually a year.
2)Composite of sales force option
Under this technique, views of
sales man, branch manager, area manager and sales manager are secured for the
different segments of the market. Sales man being closes to the actual users is
required to estimate expected sales in their respective territories and
sections.
3)Group executive judgment
technique
this is the process of
combining, average or evaluating the opinions and views of top executives in some other way.
4) Market test technique
Sellers sell their product in a part
of the market for some time and evaluate the sales for the full market on the
basis of results of test sales.
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