Quantitative Approach to Management
Demand forcasting
with Buenamega M. Arcoirez
Understandin
e m a
g
Dorecas nd
F tin g
Objectives:
1. Define what is demand forecasting.
2. Identify its importance.
3. Identify the process of demand forecasting.
4. Identify challenges in demand forecasting.
5. Enumerate the types of demand forecasting.
6. Identify the methods of demand forecasting.
Demand Forecasting?
the backbone of the business.
the process of predicting future customer demand using
historical sales data, market analysis, and analytical
techniques.
helps businesses anticipate how much product customers will
buy over a specific future period.
Core to planning production, inventory, marketing, and
finance.
Importance
Role in the Supply Chain
Management
Micro Industrial Macro
Level Level Level
The Process of Demand
Forecasting
1. Comprehensive Data Collection
A systematic process of gathering, measuring, and
analyzing information from various sources using validated
procedures and techniques.
The goal is to obtain reliable, information-rich data that
can be used for research, analysis, decision-making, and
problem-solving.
2. Methodological Diversity
Refers to the use of a variety of research methods
and approaches within a given field of study.
It acknowledges that no single method is universally
best and that different methods are suited to address
different research questions and contexts.
This approach can lead to a more comprehensive
understanding of complex phenomena by integrating
diverse perspectives and data sources.
3. Iterative Process
A method of building, refining, and improving a
project or product through a series of repeating cycles,
rather than a linear, one-time approach.
It involves repeated cycles of designing, prototyping,
testing, and revising until a satisfactory outcome is
achieved.
Key characteristics of an iterative process:
Cyclical: The process involves repeating steps, rather
than a one-way progression.
Feedback-driven: Each cycle incorporates feedback
from testing and user input to inform the next iteration.
Incremental improvement: Each cycle leads to a more
refined and improved product or outcome.
Flexibility: The iterative approach can adapt to
changing requirements or new information during the
process.
4. Integration of Technology
Modern demand forecasting uses advanced
technologies. AI and machine learning are particularly
significant. These technologies efficiently process large
data sets. They identify complex patterns and provide
detailed, predictive insights.
5. Strategic Decision-Making
The main aim of demand forecasting is strategic
planning. Accurate forecasts help businesses in several
ways. They improve inventory management and align
production with demand.
Forecasts anticipate market shifts and help in
resource allocation.
This enhances operational efficiency and competitive
positioning.
Challenges in Demand Forecasting
Types of Demand Forecasting
Types of Demand Forecasting
1. Passive demand forecasting
Passive demand forecasting uses sales data
from the past to predict future demand.
This is the simplest type of demand
forecasting, because it doesn’t require you
to use statistical methods or study economic
trends.
1. Passive demand forecasting
2. Active demand forecasting
An active forecasting model takes into
consideration your market research,
marketing campaigns, and expansion
plans.
2. Active demand forecasting
3. Short-term projections
Short-term demand forecasting only looks
at the next three to 12 months.
This type of demand forecasting is useful
for managing your just-in-time supply
chain.
3. Short-term projections
4. Long-term projections
Your long-term demand forecast will make
projections one to four years into the future.
This forecasting model focuses on shaping
your business growth trajectory.
5. External macro forecasting
External macro forecasting incorporates
trends in the broader economy, examines
how those trends affect your goals on a
macro-level, and gives you direction on
how to meet those goals.
6. Internal business forecasting
Internal business demand forecasts review
your operations to ensure you can meet
customer demand and growth goals.
Methods of Demand Forecasting
Methods of Demand Forecasting
1.Qualitative/ Survey Method
-one of the most commonly used methods for forecasting
demand in short term. In this, organizations conduct surveys to
determine demand directly from consumers.
Consumer Surveys
Opinion Model
Delphi Model
Nominal Group Techniques
Qualitative/ Survey Method
Qualitative/ Survey Method
Qualitative/ Survey Method
Qualitative/ Survey Method
Methods of Demand Forecasting
Methods of Demand Forecasting
1.Quantitative/ Statistical Method
-are used when forecasting is to be done for a longer
period of time. These methods utilize the time series and cross-
sectional data to estimate demand.
Trend Projection
Barometric Method
Econometric Method
Other Statistical Methods
Quantitative/ Statistical Method
Quantitative/ Statistical Method
Quantitative/ Statistical Method
Quantitative/ Statistical Method
Quantitative/ Statistical Method
Quantitative/ Statistical Method
Quantitative/ Statistical Method
4. Other Statistical Methods:
Index Number
Simple Index Number
Composite Index Number
Prices Index Number
Quantity Index Number
Time Series Analysis
Secular Trend
Short Time Oscillation
Seasonal Trend
Cyclical Trend
Irregular Trend
Decision Tree Analysis
San Miguel Corporation
San Miguel Corporation
San Miguel Corporation Historical
Data
San Miguel Corporation Projections
References
Makridakis, Wheelwright & Hyndman. (1998). Forecasting: Methods and Applications.
Wiley.
Chopra, S., & Meindl, P. (2016). Supply Chain Management: Strategy, Planning, and
Operation. Pearson.
Hyndman, R.J., & Athanasopoulos, G. (2018). Forecasting: Principles and Practice.
OTexts.
https://redstagfulfillment.com/what-is-demand-forecasting/
https://thousense.ai/blog/forecasting-the-future-supply-chain-managements-art-of-
demand-forecasting/
https://tutorstips.com/methods-of-demand-forecasting/
San Miguel Corporation Annual Reports (available online).
“A Comparison of Demand Forecasting Techniques in the Food and Beverage Industry”,
IJF, 2020.
Thank you!
