Demand-Driven Forecasting: A Structured Approach to Forecasting, 2nd Edition

CHAPTER 2

What Is Demand-Driven Forecasting?

Demand forecasting is a critical function that influences companies worldwide across all industries, including heavy manufacturing, consumer packaged goods, retail, pharmaceutical, automotive, electronics, telecommunications, financial, and others. Not only is demand forecasting critical to driving out inefficiencies in the supply chain, but it also affects all facets of the company on an enterprise-wide basis. Predicting future demand determines the quantities of raw materials, amount of finished goods inventories, number of products that need to be shipped, number of people to hire, number of plants to build, right down to the number of office supplies that should be purchased. Demand forecasts are necessary because the basic operations process, moving from the suppliers' raw materials to finished goods to the consumers' hands, takes time, particularly in our current global economy. Companies can no longer simply wait for demand to occur and then react to it with the right product in the right place at the right time. Instead, they must sense demand signals and shape future demand in anticipation of customer behavior so that they can react immediately to customer orders.

To make matters even more challenging, the shift in the global economic climate over the past five years has created an environment that is increasingly volatile, fragmented, and dynamic, making it difficult to predict demand. What's more, industry consolidation, ...