Development of Demand Forecasting Process

The purpose of demand forecasting is to predict the future demand of products or items, and thus, to ensure that right amount of products or items is available when needed. Because future events cannot always be known beforehand, forecasts are usually incorrect. For this reason, companies need to make contingency plans on account of the inaccuracy, resulting in more costs. By improving different aspects of demand forecasting, more accurate forecasts can be made, leading to decreases in costs and increases in service level. The demand forecasting process combines different aspects of demand forecasting into a multi-step process, which can be used as a framework for how companies should handle their demand forecasting. However, there are several interpretations of how the demand forecasting process should function. The case company of this study is a Finnish paints and coatings manufacturer, which operates in both industrial and consumer markets. The purpose of this study is to use the concept of Demand Forecasting Process to evaluate and improve demand forecasting in the case company in order to provide the company with more accurate forecasts. This is done by evaluating how different phases of the demand forecasting process are handled in the case company. Afterwards possible alternate approaches are suggested and their effects are further estimated or tested. The company’s use of a specific forecasting software as the main tool with demand forecasting limits some of the recommendations and alternatives that are presented in this study. The data that is used in this study is mostly the sales data of different products, which is provided by the case company. The results of this study indicate that there are some steps in the demand forecasting process of the case company which could be improved. This means that some recommendations can be made on how the demand forecasting process should work in the case company. Because of the external approach of this study, which lead to the lack of proper information in some cases, and the limitations that the forecasting software as part of the demand forecasting process created, some of the findings of this study are not necessarily applicable in other studies and some of the solutions that were presented are only the best possible from the ones that are available for the case company