Demand Forecasting Techniques and their use within Dell Corporation

Essay by Hokie95University, Master'sA+, March 2006

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The objective of this assignment is to investigate different business forecasting methods, and demonstrate the benefits of their use for a specific organization. We have learned that demand forecasting invokes the processes of determining exactly what service/products are needed, in what quantity, and in what amount of time. Organizations that are able to implement effective forecasting will be better equipped to find the balance between managing demand for a product/service and the capacity to meet this demand. The ability of optimizing this unique balance enables an organization to use this as a competitive advantage over their competitors

There are a variety of forecasting models to choose from and organizations should first decide which type of business decision is being made. This initial determination will allow managers to decide which forecasting methods are appropriate or not given the period of time allotted. There are four basic families that describe distinct demand forecasting techniques which include the qualitative, time series analysis, causal, and simulation models.

We have learned that it is important to keep options open to apply different models - the one most readily available or commonly used may not be the most appropriate, and choosing the wrong one can cost a larger organization millions.

Qualitative Models

The qualitative forecasting technique is highly subjective in that it is readily influenced by opinions and estimates primarily utilized for long-range corporate strategies. The unique distinction between this method and the other three forecasting families is that those tend to be more quantitative in nature, relying heavily on the process of gathering and analyzing hard data. There are no formal mathematical models utilized in this forecasting family. For example, market research normally consists of a third party firm that primarily conducts surveys and interviews to determine product or service interest on various demographics. This...