Limitations of Demand Forecasting

  1. Change in Fashion: Is an inevitable consequence of advancement of civilization. Results of demand forecasting have short lasting impacts especially in a dynamic business environment.
  2. Consumers’ Psychology: Results of forecasting depend largely on consumers‘ psychology, understanding which itself is difficult.
  3. Uneconomical: Requires collection of data in huge volumes and their analysis, which may be too expensive for small firms to afford. Estimation process may take a lot of time, which may not be affordable.
  4. Lack of Experienced Experts: Accurate forecasting necessitates experienced experts, who may not be easily available. Forecasting by less experienced individuals may lead to erroneous estimates.
  5. Lack of Past Data: Requires past sales data, which may not be correctly available. Typical problem in case for a new product.
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