The Procurement Glossary » Demand Forecasting
Demand Forecasting
Inventory & Logistics
Definition
Predicting future demand for goods to guide purchasing, inventory and production planning.
Explanation
Forecasts drive how much to buy and hold. They combine history, trends, seasonality and business intelligence; better forecasts mean less safety stock and fewer stockouts. Sharing them with suppliers improves the whole chain.
Example
The demand forecast anticipates a Q4 spike, so the buyer builds stock and warns suppliers in advance.
Related terms
- Collaborative Planning, Forecasting & Replenishment (CPFR) — A practice where buyer and supplier share forecasts and plans to synchronise supply with demand.
- Safety Stock — Extra inventory held as a buffer against variability in demand or supply, to reduce the risk of stockouts.
- Replenishment — The process of restocking inventory to maintain target levels as items are consumed.
- Bullwhip Effect — The amplification of demand variability as it travels up the supply chain, causing swings in orders and stock.
Frequently Asked Questions
What is Demand Forecasting?
Predicting future demand for goods to guide purchasing, inventory and production planning. Forecasts drive how much to buy and hold. They combine history, trends, seasonality and business intelligence; better forecasts mean less safety stock and fewer stockouts. Sharing them with suppliers improves the whole chain.
Can you give an example of Demand Forecasting?
The demand forecast anticipates a Q4 spike, so the buyer builds stock and warns suppliers in advance.
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