What is the purpose of demand forecasting?

The purpose of demand forecasting is to predict future customer demand. This process is crucial for businesses as it allows them to prepare for changes in customer preferences, market trends, and overall demand for their products or services. By accurately predicting future demand, organizations can optimize their inventory levels, production schedules, and resource allocation, thus minimizing costs and maximizing customer satisfaction.

Forecasting demand involves analyzing historical data, market conditions, and economic indicators to make informed predictions. This information serves as the foundation for strategic planning across various functions within the organization, enabling better alignment of supply with demand.

While making informed pricing strategies, scheduling employee shifts, or evaluating supplier performance are important aspects of business operations, they are not the primary focus of demand forecasting. Instead, those functions may utilize the insights gained from demand forecasts to enhance their respective processes.