Demand forecasting.

Demand forecasting plays a very important role in decision making. Some idea about the future demand is a pre-requi site for making decisions in various aspects of management. In marketing there are a number of decisions, such as the fixation of targets for different geographical regions, adver tising, other promotional efforts, and product pricing are all related to demand forecasts. In the area of finance it is extensively used for budgeting and to forecast profits, cash flows and capital expenditure decisions. In the production area demand forecasting is necessary in designing a schedule for production planning and inventory control. The materials managers need forecasts for planning the requirements of materials, in the short run, and warehouse expansion, in the long run. For manpower planning long-term demand forecasts are essential. In corporate planning and project evaluation, long-term forecasts of demand for the existing product and the products into which the company plans to diversify are essential.

For Governments the need for demand forecasting is obvi ous. In a country like India, the investment strategy in agriculture, both for production and storage of foodgrains will require not just the aggregate all-India forecasts of demand and supply but their regional breakdown. It is not only for foodgrains but various other commodities like energy, fertilizers, steel etc., require long-term demand forecasts for investment decisions.

Demand forecasting or any aspect of business or economic forecasting is an integration of economic analysis, statistics and management's judgement. It is not a mechanical exercise to be left to the computers or to the statistical assistants. Management judgement based on their wide experience with products and markets, is critical in the development of demand forecasts, both in the short and the long run. The scientific methods only help in increasing the objectivity of the fore casts.