Demand forecasting: what is it and why is it important?

Demand forecasting

Every organization has demand forecasting needs, from manufacturers to service providers. The need to forecast demand for companies is an integral part of their operations. The success of a company relies heavily on the ability to predict future trends and take proactive steps.

Today, there are many tools that allow businesses to better predict demand, with data insights proving to be one of the most valuable ways.

What is the Demand Forecasting?

Demand forecasting is a process that identifies potential or anticipated needs for a product or service and then calculates the volume of demand required to meet that need. 

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It’s typically employed by companies to identify potential opportunities and make forward-looking decisions about how much inventory an organization should maintain.

Forecasting demands using Data insights

Data insights are becoming more popular for businesses, both small and large. Demand forecasting is one area where data insights can offer significant benefits to companies. 

Forecasting demand can be challenging. However, it is important to provide accurate sales predictions to meet future demand, identify items that may need replenishing, and rally workers to meet customer demands. 

Data insights can help by providing information on the past trend of similar products or services.

What are the demand forecasting methods?

Demand forecasting is the process of estimating both the quantity and the timing of future customer demands for a particular product or service. There are four general demand forecasting methods, including: 

  • Demand Curve Method: The demand curve method is based on the assumption that customers will want to buy more units of a product as prices decrease. This method may be appropriate for products such as food and soap, where there is little variation in quality.
  • Active Method: Active plan forecasting is a common niche for companies that are growing and expanding. The active model of demand forecasting factors into aggressive growth plans such as marketing or product development and the overall competitive environment of the industry.
  • Short-term Method: Short-term marketing forecasting predicts demand for a period of three to 12 months out. This may be helpful for companies to gain a better idea of what to expect in the next few quarters up to a year, but no further. Seasonal demand is mainly calculated using this forecast.
  • Long Term: Long-term demand forecasting is used by businesses and organizations to predict customer demand over an extended period of time, up to three or four years out. This type of demand forecast might affect marketing and product sales strategies.

Why is demand forecasting important?

Demand forecasting is the task of predicting demand in the future. While that may seem simple, it can be more challenging than it seems. Demand forecasting is used across all industries to help guide production schedules, inventory management, marketing plans, and more. It’s important for companies to have an accurate understanding of what will be needed in the future so they are not left unprepared.

A forecast developed with an appropriate model can help estimate what that demand will be. A forecast tells a company how much to produce, which minimizes the risk of overproduction or underproduction of their product.

How DiLytics can help

When it comes to demand forecasting, many companies struggle with an accurate forecast. Demand forecasting is a difficult task because of the high volume of unknown variables that play into the supply and demand equation.

Machine learning should be part of demand forecasting, and DiLytics’s versatile solution helps you get the most out of your model. Our serverless microservices architecture allows your team to take advantage of ML without facing the roadblocks that many other teams face.


In conclusion, demand forecasting is necessary to make sound decisions for the future and is invaluable when it comes to marketing. Decision-makers need to be aware of what will happen in the future and with demand forecasting that becomes possible. This technique also has a major influence on marketing, and without it, you would simply be guessing which products would sell more than others.