Objectives For Demand Forecasting

Two types of forecasts:

  1. Short-term forecasting
  2. Long-term forecasting

 Short Term Objectives

  1. To help in preparing suitable sales and production policies.
  2. To help in ensuring a regular supply of raw materials.
  3. To reduce the cost of purchase and avoid unnecessary purchase i.e. Management of inventories
  4. To ensure best utilization of machines.
  5. To make arrangements for skilled and unskilled workers so that suitable labour force may be maintained.
  6. To help in the determination of a suitable price policy.
  7. To determine short term financial requirements.
  8. To determine separate sales targets for all the sales territories.
  9. To eliminate the problem of under or over production.

 Long term Objectives

  1. To plan long term production.
  2. To plan plant capacity.
  3. To estimate the requirements of workers for long period and make arrangements.
  4. To determine an appropriate dividend policy.
  5. To help the proper capital budgeting.
  6. To plan long term financial requirements.
  7. To forecast the future problems of material supplies and energy crisis.
  8. Planning of new project
  9. Expansion and modernisation of existing unit
  10. Diversification
  11. Technology upgradation
  12. Assessing long-term financial needs.
  13. Arranging suitable man power.
  14. Evolving suitable strategy for changing pattern of consumption , industrialisation, urbanisation education.

Forecasting Time Horizons

Short term forecasting refers to forecasts of periods of one year not exceeding a year when the demand for its products is changing very frequently.

Long term forecasting refers to the forecasts prepared for long period during which, the firms scale of production capacity may be expanded/reduced. Long term forecasting, normally for the periods exceeding a year or 3-4 years or even a decade or more than 10 year & above.re

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By Hassham

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