Demand forecasting is the art and science of forecasting customer demand to drive holistic execution of such demand by corporate supply chain and business management. Demand forecasting involves techniques including both informal methods, such as educated guesses, and quantitative methods, such as the use of historical sales data and statistical techniques or current data from test markets. Demand forecasting may be used in production planning, inventory management, and at times in assessing future capacity requirements, or in making decisions on whether to enter a new market

Demand forecasting is predicting future demand for the product. In other words it refers to the prediction of probable demand for a product or a service on the basis of the past events and prevailing trends in the present. It is becoming increasingly important and necessary for business to predict their future prospects in terms of sales, cost and profits. The value of future sales is crucial as it affects costs profits, so the prediction of future sales is the logical starting point of all business planning.

A forecast is a prediction or estimation of future situation. It is an objective assessment of future course of action. Since future is uncertain, no forecast can be percent correct. Forecasts can be both physical as well as financial in nature. The more realistic the forecasts, the more effective decisions can be taken for tomorrow.

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