Page 59 - DMGT521_PROJECT_MANAGEMENT

Project Management

Notes 2. Plausibility of forecasts: Forecasts of demand must be reasonable, consistent and plausible.
Assumptions made should stand scrutiny and techniques adopted must be commensurate.
Explanatory note on these aspects must be available in the write-up on methods and
methodology employed in forecasting.
3. Economy of forecasts: Forecasting exercise should not be expensive in terms of efforts and
costs. Additional costs of ways and means for improving the accuracy of forecasts should
not exceed the extra gain expected.

4. Quick Results: Method of forecasting chosen should be capable of yielding quick and
useful results, If method selected takes fat too long a time to yield accurate forecast, it may
not be conducive for taking quick and effective decisions. Always remember not to make
best enemy of ‘good’.
5. Availability and Timeliness: Methodology of forecasting should be such that it can easily
be updated when changes occur in the demand relationships.
6. Durability: Demand forecasts should not be changed frequently. Durability of forecast is
subject to the followings:
(a) Simple and reasonable relationship between price and demand, advertisement and
sales, level of income and volume of sales etc.

(b) Stability of relationship between the above variables.
7. Flexibility: Flexibility of forecast is an added advantage. It is desirable to be able to adjust
‘coefficient’ of variables from time to time to cope with the changing conditions.

4.5.1 Methods of Forecasting Demand

To facilitate proper and reliable appraisal of investment proposal, we require a reasonably
accurate forecast of demand. Starting with qualitative methods like survey of collective opinions,
buyers’ intention, Delphi approach and its variant, a number of quantitative methods are used
for compiling and computing demand forecasts as detailed below:
1. Collective Opinion Survey: Sales personnel are closest to the customers and have an
intimate feel of the market. Thus they are most suited to assess consumers’ reaction to
company’s products. Herein each salesperson makes an estimate of the expected sales in
their respective area, territory, state and/or region, These estimates are collated, reviewed
and revised to take into account changes in design/features of products, changes in selling
prices, projected advertising and sales promotion campaigns and anticipated changes in
competitors: marketing policies covering product, people, price, promotion and place.
Opinions of all managers involved at various levels of sales organisation are also included
in the survey. Thus “collective opinion survey forms the basis of market analysis and
demand forecasting.
Although this method is simple, direct, first hand and most acceptable, it suffers from
following weaknesses:
(a) Estimates are based on personal judgment which may not be free from bias.
(b) Adding together demand estimates of individual salespersons to obtain total demand
of the country maybe risky as each person has knowledge about a small portion of
market only
(c) Salesperson may not prepare the demand estimates with the requisite seriousness
and care

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