DEMAND FORECASTING METHODS
Demand forecasting is one of the most important tools of production and operation management of a company.
1. The objective of demand forecasting is to forecast the sales of the company in future and it helps the company in budgeting it's sales and to determine the resources which the company will require to fulfill that demand.
2. Forecasting demand method can also help the companies to avoid oversupply and undersupply of the products
3. This also helps the company in inventory management and lowers the cost of the warehousing.
Quantitative methods are
1.
Although this technique may seem too simplistic, its advantages are low cost and ease of preparation and comprehension. Its major weakness, of course, is its inability to make highly accurate forecasts. Another weakness is that it simply replicates the actual data, with a lag of one period; it does not smooth the data.
2. SIMPLE AVERAGE METHOD
Advantages Of Simple Average Method
Main advantages of simple average method are as follows:
1. Simple average method is very suitable when materials are received in uniform lot quantities.
2. Simple average method is very easy to operate.
3. Simple average method reduces clerical work.
Disadvantages Of Simple Average Method
Major disadvantages of simple average method are as follows:
1. If the quantity in each lot varies widely, the average price will lead to erroneous costs.
2. Costs are not fully recovered.
3. Closing stock is not valued at the current assets.
3.WEIGHTED MOVING AVERAGE METHOD
Advantages and Disadvantages
Because the WMA lags the price line, its signals regarding trend changes are delayed.
A trader using a WMA is less likely to pick a trend change early but is also less likely to mistake a minor correction for a trend change. The advantage of using WMAs is that they pick up trends more quickly than simple moving averages. Some traders prefer to use WMAs for shorter time periods to capture changes quicker.
The disadvantage of WMAs is that
1. The objective of demand forecasting is to forecast the sales of the company in future and it helps the company in budgeting it's sales and to determine the resources which the company will require to fulfill that demand.
2. Forecasting demand method can also help the companies to avoid oversupply and undersupply of the products
3. This also helps the company in inventory management and lowers the cost of the warehousing.
Quantitative methods are
1.
Although this technique may seem too simplistic, its advantages are low cost and ease of preparation and comprehension. Its major weakness, of course, is its inability to make highly accurate forecasts. Another weakness is that it simply replicates the actual data, with a lag of one period; it does not smooth the data.
2. SIMPLE AVERAGE METHOD
Advantages Of Simple Average Method
Main advantages of simple average method are as follows:
1. Simple average method is very suitable when materials are received in uniform lot quantities.
2. Simple average method is very easy to operate.
3. Simple average method reduces clerical work.
Disadvantages Of Simple Average Method
Major disadvantages of simple average method are as follows:
1. If the quantity in each lot varies widely, the average price will lead to erroneous costs.
2. Costs are not fully recovered.
3. Closing stock is not valued at the current assets.
3.WEIGHTED MOVING AVERAGE METHOD
Advantages and Disadvantages
Because the WMA lags the price line, its signals regarding trend changes are delayed.
A trader using a WMA is less likely to pick a trend change early but is also less likely to mistake a minor correction for a trend change. The advantage of using WMAs is that they pick up trends more quickly than simple moving averages. Some traders prefer to use WMAs for shorter time periods to capture changes quicker.
The disadvantage of WMAs is that