Demandforecasting

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Demand Forecasting

DEMAND FORECASTING:

A demand forecast is the prediction of what will happen to your company's existing product sales.

Demand forecasting is the activity of estimating the quantity of a product or service that consumers will purchase.

Demand forecasting involves techniques including both informal methods, such as educated guesses, and quantitative methods, such as the use of historical sales data or current data from test markets. It may be used in making pricing decisions, in assessing future capacity requirements, or in making decisions on whether to enter anew market.

Determination of the demand forecasts is done through the following steps:

1 Determine the use of the forecast 2 Select the items to be forecast3 Determine the time horizon of the forecast4 Select the forecasting model(s)5 Gather the data 6 Make the forecast7 Validate and implement results.

Methods of forecastingToo much emphasis should not be placed on mathematical or statistical techniques of forecasting. Though statistical techniques are essential in clarifying relationships and providing techniques of analysis, they are not substitutes for judgment.

Forecasting also should not be left entirely to the judgment of the so-called experts. What is needed is some commonsense mean between pure guessing and too much mathematics.Various Methods of Forecasting Survey of Buyers Intentions

Market Survey Studies. 1. Delphi Method2. The Collective Opinion also called as Sales Force Polling or Expert Opinion polls. 3. Analysis of Time Series and Trend Projections 4. Use of Economic Indicators Regression Analysis and Economic Model Building. 5. Controlled Experiments Test Marketing. 6. Judgmental Approach

Demand Forecasting - Cadbury

Origin of Cadbury Cadbury is the brain child of John Cadbury Starting in form of grocery business in Birmingham in 1824In 1853, Cadbury became the confectioner to the British Crown.Today Cadbury operate Globally

Cadbury Dairy Milk has been the market leader in the chocolate category for years and has participated and been a part of every Indian's moments of happiness, joy and celebration.

CadburyIndia ltd. began its operations in India 1948byimporting chocolates. After 62 years of existence in IndiaCadburyenjoys a value market share of over 70%- the highestCadburybrand share in the world.

CadburyIndia Limited is a fully owned subsidy of Kraft Foods Inc. with approximately $50 billion, on 2nd February 2010 Kraft foods has sealed its takeover overCadbury and have operations in more than 70 countries.(bbc,2010)

In India, it began its operation in the year 1948byimporting chocolates initially. Today the company has five company owned manufacturing facilities at Thane, Induri (Pune) and Malanpur (Gwalior), Bangalore and Baddi (Himachal Pradesh) and four sales units spread across the country.

Cadbury plan their production process by using a time series method as this helps Cadbury to accurately produce the needed amount of chocolate at the correct period of time.

A time series shows historical data that can be used and analysed to predict future trends.

Festive Seasons are peak selling times for all chocolate manufactures including Cadbury, this is obviously because chocolate products make good gifts for these occasions.

Time series analysis does not explain the casual relationship between variables & how they will be in future also. It simply assumes that past behavior of the variable will continue in future also.

Hence time series analysis tries to find out the factors which affect the behavior of the variable. The changes in the variable over a period of time are divided into 4components.

They are: TRENDS SEASONAL VARIATIONS CYCLICAL VARIATIONS RANDOM FLUCTUATIONS.

ADVANTAGESDISADVANTAGESThe data helps Cadbury to reduce wastage and produce the amount of products that customers would purchase The data is reliable if collected accurately.The forecast helps Cadbury to make products efficiently as it helps Cadbury to set a target of the amount of products needed; there are always enough products to supply to customers.

Cadbury need to have a lot of past data in order for the time series method to be used accurately to predict sales figures.If the external environment doesnt stay stable then there will be problems with the forecast for example if the prices of the raw materials used to produce Cadbury products increases then the price of the product has to increase in order for Cadbury to make a profit from the product produced. This may affect the customers purchasing trends. The data may be biased or representative.

Independent variables affecting Demand of Cadbury Dairy Milk:

Price: This product is a brand loyal product, so if there is a slight increase in the price, the demand of the product will remain unaffected. But if there is a decrease in the price, the demand of the product may slightly increase.Income: If the income of the people increases, the demand of the product also increases and if the income of the people decreases, the demand of the product decreases because then people will go for lower price chocolate like clair or melody of Rs.1 or Rs. 2. So, there is a positive relationship between income and the product demand.Consumers taste and preferences: Cadbury produced milk chocolates by using the high quality of cocoa bean and the taste has still remained the same which has touched the heart of the consumers. So, they will not like to go for any other product.Competition: There are many competitors like Cadbury 5-star, Nestle Kit-Kat, Parle Chox, foreign chocolates (Chinese), Lot etc. In the market so if the price of the competitors increases, the demand of the dairy milk also increases. But if the price of the competitors decrease, the demand of the dairy milks not much affected by it. Price of Complementary Goods: Cadbury dairy milk is made from the milk, sugar, cocoa bean and cocoa powder. If the price of these complementary goods increases then there will be no change in the demand. Because Cadbury dairy milk is a brand loyal product so there will not be any effect on the demand of the product.Population & Age group: This product is meant for the children, adults and also for the old people so the age groups are not much affected the demand of the product so demand remain same and by the increase in the population, the demand of the product also increases.Advertisement campaign: Advertisement campaign has played a vital role in attracting the major part of the population towards the Cadbury dairy milk.Celebrations & Occasions: During the festivals and occasions, the consumption of Cadbury increases because its a product for enjoying the taste of each and every moment with harmony.Brand Image: The brand image of the Cadbury plays an important role in the demand of the Cadbury. This product has built such a brand image that it has much attracted the mind of the consumers so they will not like to switch over to the other brand.

Conclusion & RecommendationsDemand forecasting is widely used by business firms to estimate the future demand of their products & services. Business firms use historical or past date to explain future demand.The estimation of future demand helps the business firms to analyze their production, distribution, selling, advertisement &promotional activities & the cost involved in covering these activities.Recommendations can be considered by business firms to enhance their performance in serving its customers the best.Customers complaints should be welcomed & handled effectively. A quick response to customer complaint can bring a positive impact on part of business firms.Suggestions from customers should be taken into consideration.

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