What is the purpose of demand forecasting?

The purpose of demand forecasting is to predict future customer demand. This process involves using historical sales data and market analysis to make informed estimates about the quantity of products or services that consumers will purchase in a given timeframe. Accurate demand forecasting is essential for businesses, as it guides several critical operational decisions, including inventory management, production scheduling, and resource allocation.

Understanding future demand helps organizations align their supply chain operations effectively, minimizing the risk of overproduction or stockouts. It allows companies to optimize their inventory levels to meet customer needs without incurring unnecessary costs. Reliable demand forecasts enable businesses to make strategic decisions, ensuring they can fulfill customer orders promptly while maximizing efficiency in their operations.