Demand forecasting

- All forecasts are wrong. We know this because a forecast is by definition an estimate of what you think will happen. You routinely forecast many things in life, like budgeting your paycheck, but in operations management, when we speak of forecasting, we usually mean demand forecasting, which customers will want which products, how many and when. Based on your forecast of demand, you've put together a plan for the company to efficiently meet that demand. Therefore, the forecast drives inventory levels throughout your company for the entire forecast period. It's important to note that there are two distinct types of demand in business. First is independent demand. This is the demand you forecast, which products will your customers want, and how many, and when. For example, Ford Motor Company will forecast customer demand for Mustangs in each of their markets. The plan to meet that forecast will determine Ford's level of…