Demand-Driven Forecasting Methods (Essay Sample)

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Demand-Driven Forecasting Methods
Demand-driven forecasting is a technique that makes use of analytical investigation of past data to assess the future demand for a product or service. I work in an insurance brokerage firm where the passive/trend projection forecasting method is used. This method involves use of previous sales information to forecast the future performance of the same time period (Rheude, 2020). We use this method to forecast sales and revenue since the two are not constant rather they fluctuate and therefore the method is used to try and achieve some form of stability in our performance. This forecast method is simple and straightforward as it assumes that the performance this year will be the same next year or has been the same as last year for same season (Rheude, 2020). While using this method, we adjust past variances such as advertisement on TV to give more accurate projections since such variances do not reoccur regularly every season. This method has helped the firm make well educated decisions from estimation of insurance cover sales and revenue realization for a forthcoming duration.
There are several factors, that affect the accuracy of forecasting. Some of these variables include consumer sentiment which reflects how assertive individuals feel in demanding for a product or service, disposable income which is the availability of money for individuals to spend and political conditions which determine the stability of an economy (Prevedere, 2022). Disposable income together with consumer sentiment aid firms to determine if consumers have money and their willingness to spend it. There are also variables that cause errors which include reliance on history alone which in most case lacks quality and relevance. Using historical data to make forecasts may seem viable but it does not account for anomalies as well as the consumer’s frequency of shifts in the demand for a product/ service (Rockwell, 2020). According to Rockwell (2020), sales representatives keeping quiet about market or customer changes is another variable causing error in forecasting. Sales representatives, say for example those in the insurance brokerage where I work, are charged with daily interaction with customers when selling insurance cov