Classification of Demand Forecasts:

Demand forecasts may be classified according to the length of planning period and use.

• Short term       -          one to five weeks
• Medium/Intermediate term   -          one month to two years
• Long term       -          two to ten years

Generally, short-range forecasts serve primarily as guides to current operations. Medium and long range forecasts are frequently of a more comprehensive or aggregated nature.

Table summarizes the types of decisions affected by forecasts of different planning horizons. It also illustrates the areas of application of different types of forecasts. As one would expect, short-term forecasts are typically more accurate than longer-term forecasts. Most of the firms maintain forecasts covering all the three time periods or a combination of them.

 Table: Type of Organisation Decisions Affected by Different Forecasts