Demand Forecasting vs. Sales Forecasting

If you start browsing the web about business forecasting, you might cross both sales forecasting and demand forecasting. The two concepts are tightly related but not completely identical. I will try to outline the differences in this post, the distinction being somewhat subtle.

Sales forecasting is the most straightforward: you take your sales history as input in order to produce a sales forecast. This is the bread and butter of most Lokad sales forecasting add-ons. For most retail products, this approach is already fairly efficient. Indeed, sales are the only reliable quantitative indicator available about the customer demand for products.

Yet, it happens that sales data end-up with bias, for example

eCommerce have their own specific bias as well

If you want to produce a demand forecast, then you need to use the demand history as input. In practice, it means that you need to correct (probably manually) your sales history to reflect the demand. For example, you might replace the zeroes caused by ruptures by the sales amounts that “would have been expected” if the product would have been available. Since demand bias are very business specific, such corrections usually require human expertise to be carried out.

We have only scratched the surface of the topic, stay tuned …