Demand Forecasting Methods Used By Fruit Vendors

Basavarajeswari Group of Institutions BALLARI INSTITUTE OF TECHNOLOGY & MANAGEMENT,BELLARY. (Formerly: Bellary Engineering College) DEPARTMENT OF MANAGEMENT STUDIES Assignment No: 1 Topic:“A Study on Demand Forecasting Methods Used by Fruit Vendors” Subject :Marketing Management Submitted by Basanagouda MBA I sem Ballari Institute Of Technology & Management -Bellary

Submitted to Prof: G.P. Dinesh MBA (Ph.d) BITM – Bellary Year: 2008-09 CONTENTS Introduction Theoretical Aspects of Demand Forecasting Meaning Types of Forecasting Determinants for Demand Forecasting of Non-Durable Consumer Goods Methods of Demand Forecasting Demand Forecasting Methods UsedByFruit Vendors Fruit Vendor List of Fruits Market Survey Methods Followed by Fruit Vendor for Demand Forecasting Conclusion

  Introduction

Forecasting is a prediction about a future event which is mostly likely to happen under given conditions. Demand forecasting means estimate of expected future demand conditions. Kotler remarked that `forecasting is like trying to drive car blindfolded and following directions given by a person who is looking out of the back window’. Looking into the future which is uncertain, is really a difficult task. But it has been so in the experience mankind. Assuming that future would be bright, every man takes some risks in life and tries to advance further. In the business field, there was a lack of forecasting in the past. It was only after the depression in 1930s, that systematic forecasting was realized as a tool of management.

Theoretical Aspects in Demand Forecasting Meaning of Demand forecasting: Forecasting is defined as study with scientific prediction in regard to an event which may have future demand goods, services either at micro level or at the macro level. Forecasting deals with likely shape of future events. It is scientific guesswork. Demand forecasting refers to the prediction or estimation of a future situation under given constraint. Types of Forecasting: Short term forecasting: Short term forecasting covers a periods up to one year. It relates to policies regarding sales, purchases, pricing and finances. Medium term forecasting: Medium term forecasting is intermediate between shortterm long term forecasting. This is usually followed by a firm which is subjected to the medium term variation of the trade cycle. Long term forecasting: Long term forecasting refers to refers to a period beyond one year. The purposes of long term forecasting are: (i) Planning new unit or expansion of existing unit. (ii) Planning long term financial requirements. (iii) Planning manpower needs. Determinants for Demand Forecasting of Non-Durable Consumer Goods Non-durable goods are those commodities which are used in a single act of consumption. They are food articles, beverages, tobacco, etc. Demand for such goods is influenced by three basic fact ors such as: (A) Disposal income of the people or purchasing power, (B) Price of the commodity, (C) Size and characteristics of population. The formula used for estimating the demand for nondurable goods is d = f(Y.D.P) Where: d = demand, Y = disposal income, D = size of the population and P = the price Purchasing power of the people: It depends upon the disposal income of the people of the country. The disposal income is obtained from personal income after making tax and other deductions. In a poor country like India, disposal income is very low and consequently the purchasing power of the people also is very low. So purchasing power of people is one of determinant of demand forecasting. Size of the population and its characteristics: This refers to total population, the different income groups, social status, age-sex composition, urban and rural population, geographical characteristics, level of education, etc. Demand for non-durable consumer goods depends upon all these factors. Methods of Demand forecasting Methods of demand forecasting are classified into two categories they are: Survey Method Survey of Buyer`s intentions or consumer`s survey Survey of experts opinions Controlled experiments

Simulated market situation Statistical Method Trend projection or Time Series Method of moving averages Regression method Barometric method Economic Indicator Demand forecasting method used by fruit vendors Fruit Vendor The individual / a firm involved in selling of fruits in the market, with an intension to make profit. List of Fruits 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

Orange Apple Banana Watermelon Sweet lime Mango Pineapple Grape Guava Custard apple Kiwi Fruit Jack Fruit Pomegranate Pears Sapota

Market Survey Area Covered

: Bellary City

Contact Method

: Personal Interview.

Number of Shops / Stalls Visited : 10 Observations: We have visited fruits vendors in various parts of the Bellary city with an objective of knowing demand forecasting method used by fruits vendors in Bellary city. Most of the Fruits vendors are sole proprietors having small stalls in streets and not keen on estimating demand for their business. They maintain stock of fruits in different seasons on the basis of their experience & availability. They do not maintain past data of sales to predict demand for the coming period but having general idea of sales during the previous year. This helps the fruits vendors to maintain stock for meeting the demand, at the same time if there is a sudden increase in demand, it will be met by placing order immediately to the nearest wholesaler and directly purchases from the farmers if possible. Generally, demand will be more during festivals and marriage seasons apart from the season sale of fruits. So, they maintain high level of stock.

Methods followed by fruit vendors for demand forecasting It is evident from the survey that fruit vendors are not following any specific methods of demand forecasting. But generally follow the below mentioned steps. 1.Forecasting on the basis of information collected regarding demand for fruits in different time period / season from the wholesalers. 2.Forecasting on the basis of seasons: during the season of a particular fruit say mango in summer, supply is more and price will be comparatively less this leads to high level of demand. 3.Forecasting on the basis of economic conditions: during the recession people spend very less amount on fruits, so, demand will be low & they maintain low stock and vice-versa. 4.Forecasting on the basis of Natural calamities: Natural calamities such as drought affects the yield of fruits in turn supply. This leads to rise in price and fall in demand. 5.Forecasting on the basis of their own experience: They predict demand for very short-term say 15 days to one month on the basis of sales during the same period in the previous year and also from the sales data of the previous month. Conclusion Fruits vendors’ business is small in size and do not maintain facts & figures of their previous year’s sales and they are least worried about following specific method/s of demand forecasting for fruits. But, they are good at predicting demand on the basis of their experience in the field & daily sales for the immediate period. And any change in demand, increase will be adjusted by placing immediate orders with nearest wholesaler or even buying it from farmers, decrease will be adjusted by contracting the orders or reducing the order quantity. All this is possible because they maintain very limited stock i.e. for a few days. *********