Question

Which of the following is not a method of demand forecasting?

• A. Survey method
• B. Leading indication method
• C. Statistical method
• D. Production method

Hint:

Remember the cause-and-effect relationship: Demand forecasting comes {before} production planning. You forecast what customers will buy, and then you plan how much to produce. Therefore, the production method cannot be a method to forecast demand.

Answer 1

The Correct Option is D

Step 1: Understanding the Question:
The question asks to identify which of the given options is not a recognized technique or method for forecasting future demand for a product or service.
Step 2: Key Concept:
Demand forecasting methods are broadly classified into two categories:
1. Qualitative (or Survey) Methods: Based on the opinions and judgments of consumers, experts, or sales personnel.
2. Quantitative (or Statistical) Methods: Based on historical data and statistical techniques to project future demand.
Step 3: Detailed Explanation:
Let's analyze the options:
- (A) Survey method: This is a major qualitative forecasting method. It involves collecting information about consumer's future purchase plans through surveys, such as the survey of buyer's intentions or the salesforce opinion method.
- (B) Leading indication method (or Leading Indicators): This is a quantitative method. It involves using changes in certain economic indicators (leading indicators, e.g., housing starts) that tend to occur before changes in the demand for a specific product to predict future sales.
- (C) Statistical method: This is a broad category of quantitative methods that includes techniques like trend projection (time series analysis) and regression analysis, which use past data to forecast future demand.
- (D) Production method: This is not a method of forecasting demand. Production is planned {based on} a demand forecast. The production method is a way of measuring a country's GDP by summing up the value of all goods and services produced; it is not a technique for predicting future sales.
Step 4: Final Answer
Survey method, leading indication method, and statistical methods are all established techniques of demand forecasting. The production method is not a demand forecasting technique.