1. Management Decision- An efficient demand forecast helps management make suitable decisions regarding plant ability, raw material requirement, location and building needs and availability of labor and capital. Production program can be prepared in line with demand requirement by reducing inventory, production and other related costs.
2. Evaluation-Demand forecast also helps to evaluate the sales department’s performance.
3. Quality and Quantity Control – The demand forecast for managing an enterprise at the right time at the right time with minimum cost is a necessary and effective tool.
4. Financial estimate- Demand forecasting is also very useful in predicting your financial requirements based on sales level and production operations for a firm. In addition, even some time is needed to get money on proper terms. Therefore, the sales forecast will be able to arrange sufficient money on reasonable terms and in advance.
5. Avoiding less and more production-mouth is required for old firms and new firms. It’s more important where the firm is engaged in mass production and the production process has a long term. In such situations, an idea about the future demand is necessary to avoid low production and more production.
6. Guidelines for the future-demand forecast for a particular product also provides guidelines for demand forecast of related industries. For example, demand forecast for automobiles also helps the tyre industry to predict the demand of 2 wheels, 3 wheels and 4 wheelers.
7. Importance to the government – At large level, demand forecast is also useful for the government to set targets of import and export for various goods and to plan an international trade.