Final answer:
Demand forecasting is critical for businesses as it helps optimize inventory, resource utilization, and minimize waste by predicting product demand. Factors like consumer trends, economic conditions, competitor prices, and seasonal factors influence demand forecasting. The demand and supply model, including demand shifts and supply curves, provides a comprehensive view of the market beyond price and quantity.
Step-by-step explanation:
Demand forecasting plays a critical role in organizational operations by anticipating product demand and thereby enabling effective planning of supply chain management. It ensures that organizations can prepare the necessary inputs based on predicted demand, leading to optimized inventory levels, efficient utilization of resources, and reduced waste. Without accurate demand forecasting, businesses may either overproduce, resulting in an excess inventory, or underproduce, which can lead to a shortage of products on the market.
Factors Influencing Demand Forecasting
Consumer preferences and trendsEconomic conditionsCompetitors' actions and pricesTechnological advancementsRegulatory environmentSeasonal factors
By analyzing these factors and using demand curves and supply shifts, business can predict changes in the market and adjust their strategies accordingly. This includes the ability to graph demand shifts and supply curves to visualize how factors other than price affect the market dynamics. Hence, the seemingly simple demand and supply model serves as a powerful analytical tool beyond just understanding the impacts of price and quantity.