Demand forecasting is the technique of estimating and predicting future consumer demand for a good or service using predictive analysis of past data. It is a crucial tool for businesses to use when making decisions on pricing, production, and inventory levels.
Identifying the most crucial questions you require answers to is the first stage in making a demand forecast. This step determines the most effective demand forecasting models and techniques to be used.
The two main categories of demand forecasting techniques are qualitative and quantitative techniques.
Qualitative techniques rely on expert opinion and information acquired from the field. It is less dependent on historical trends and is typically applied when there is little data to evaluate. For instance, when a company or product first enters the market.
However, quantitative techniques make forecasts using data and analytical tools. It is based on past data on customer demand, supply chain efficiency, seasonal demand, and other variables that are driven by data.