Demand forecasting is the process of predicting future customer demand for a product or service based on historical data, market trends, and other influencing factors.

It helps businesses in inventory management, production planning, budgeting, and decision-making to meet customer needs efficiently.

Steps in Demand Forecasting

1. Specifying Objectives – Define the purpose of forecasting (e.g., production planning, sales forecasting, inventory control).
2. Determining the Perspective – Decide the forecasting time frame (short-term, medium-term, or long-term).
3. Making Choice of Methods – Select an appropriate forecasting method (qualitative or quantitative) based on data availability and business needs.
4. Collection of Data and Data Adjustment – Gather historical sales data, market trends, customer behavior, and external factors. Clean and adjust data for accuracy.
5. Estimation and Interpretation of Results – Apply the chosen method, analyze forecasted results, and interpret insights for decision-making.

In Theoretical Scenario, Making Choice of Methods is first followed by Collection of Data and Data Adjustment; we first decide the forecasting method and then collect the relevant data.

In Practical Scenario, Collection of Data and Data Adjustment is first followed by Making Choice of Methods; i.e. businesses collect data continuously. The forecasting method is chosen based on what data is available and reliable.

🧠 Common Forecasting Methods

1. Qualitative Methods (based on judgment):

• Expert Opinion

• Delphi Technique

• Sales Force Composite

• Market Research / Surveys

2. Quantitative Methods (based on data):

• Time Series Analysis (e.g., moving average, exponential smoothing)

• Regression Analysis

• Econometric Models

Scheduling

The objective of Scheduling is to allocate and prioritize demand to available facilities. The Scheduling decisions range from years to minutes/hours/days.

1. Capacity Planning:
   🔹 This is a long-term decision, typically looking years ahead to ensure that sufficient capacity exists to meet future demand.

2. Aggregate Planning:
   🔹 A medium-term scheduling decision that translates capacity planning into a general plan for production, typically over 6–18 months.

3. Master Schedule:
   🔹 A short-to-medium-term schedule that breaks the aggregate plan into specific product-level schedules.

4. Short-term Scheduling:
   🔹 Involves day-to-day or minute-by-minute scheduling of tasks, people, or machines.