What is demand forecasting? Importance and benefits of forecasting

What is demand forecasting?

Predicting future sales by using historical sales data to help in making accurate business decisions about everything from warehousing needs to inventory planning, sales promotions, and meeting customer expectations. Demand forecasting helps in estimating the revenue and sales for a future period.

Importance of demand forecasting

Demand and supply are a key function which a business needs to understand. Without the right demand function, it is not possible to operate a business, Demand forecasting helps in taking the right decisions especially for marketing, production and much more.

Demand Forecasting is an assumptive approach but there are steps which can help in making your business operations a lot more efficient, helps in understanding customer`s need and helps in improving the customer`s experience.

Preparing your budget

The right understanding of the demand for your product can help you plan the production cost much more efficiently, helping you to develop efficient budgets. Demand forecasting can help you to manage your production costs well and allocate financial resources accordingly.

Demand forecasting helps in preparing a sensible budget.

Planning and scheduling production

Demand forecasting helps you to provide the right products that your customers want and at the right time. Order fulfilment requires, forecasting the demand in advance and to effective marketing strategies for your product launch.

Storing inventory

Good inventory management needs efficient demand forecasting. This helps in saving money on warehousing and yet having enough product at hand to meet the demand in the market.

Developing a pricing strategy

Demand forecasting enables businesses to price the product accurately and build pricing strategies. When the demand for the product is forecasted based on the same business’ can plan the production, employ marketing activities, schedule supplies and formulate competitive pricing.

Demand forecasting plays a key role in understanding your overall market dynamics, customer need and managing the demand and supply function, therefore it is very important to understand the importance of demand forecasting.