What is demand forecasting?
Estimating future demand from past sales, seasonality, promotions and other factors, to plan purchasing and replenishment.
In detail
Buy too much and you tie up cash and stock; buy too little and you run out and lose orders. Demand forecasting replaces “gut feeling” with data, from a simple moving average to statistical or AI models that account for seasonality, trends and promotions.
For example
Based on the last three years of sales, the system forecasts that demand for a product in December will be 2.5 times the usual level, and prompts a larger purchase one month ahead.
How companies use it
Start with products that have stable sales and high value, keep comparing forecasts with actuals, and refine the method over time.
Common misconceptions
Treating forecasts as exact answers. Forecasts always contain errors and need to be paired with safety stock and regular review.
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