A forecast is said to be successful when the excepted demand is equal to the actual demand.
This can only be possible if the right method of demand forecasting is selected.
The criteria that need to be considered before forecasting the demand for a product are as follows:
i. Accuracy:
Implies that an organization should make forecasts close to real figures, so that the real picture of demand can be determined. For example, there would be an increase in sales in the coming years is an inaccurate forecast. On the other hand, there would be an increase in sales by 30% in the next year is an accurate forecast.
ii. Durability:
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Implies that forecasts should be done in such a way that they can be used for long periods as forecasts involves a lot of time, money, and efforts.
iii. Flexibility:
Implies that the forecasts should be adjustable and adaptable to changes. In today’s uncertain business environment, there is a rapid change in the tastes and preferences of consumers, which affect the demand for products. Therefore, the demand forecasts made by an organization should reflect those changes. Apart from this, an organization, while making forecasts, should consider various business risks that may take place in the future.
iv. Acceptability:
Refers to one of the most important criterion of demand forecasting. An organization should forecast its demand by using simple and easy methods. In addition, the methods should be such that organizations do not face any complexities. However, organizations generally prefer advanced statistical methods, which may prove difficult and complex.
v. Availability:
Implies that adequate and up-to-date data should be available for forecasts. The forecasts should be done in timely manner so that necessary arrangements should be made related to the market demand.
vi. Plausibility:
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Implies that the demand forecasts should be reasonable, so that they are easily understood by individuals who are using it.
vii. Economy:
Implies demand forecasting should be economically effective. The forecasting should be done in such a manner that the costs should be minimized and benefits should be maximized.