Time Series and Demand Forecasting

The process of budgeting in many organizations starts with a forecast of demand for the products in the forthcoming year and the sales forecast which the organization would be capable of achieving. Thus demand and sales forecasts are the most important parameters in budgeting.

Many sophisticated techniques are used in forecasting the demand for products. One of the basic methods used is the Trend Projection Method in which the time series of demand for a product over the past years is studied and the trend observed is projected into the future. If linear trend is to be used, the linear trend relationship of the form Yt = a + bt is obtained either through the visual curve fitting method or the least squares method. Then, with the help of the trend equation, the future demand is forecast.