Demand

DEMAND Demand for industrial or business is normally a derived demand for consumer goods and services The demand therefore is derived from the expectations / forecasts of the requirements from the industry or business houses The demand for industrial products are joint as well Cross elasticity of demand plays a very important role on the entire corporate strategy The demand for industrial products is more fluctuating or has high variations than the consumer products

Bullwhip effect is due to in-accurate demand forecasting, inaccurate batching, price fluctuations and distortion of information in supply chain network

Demand

FACTORS INFLUENCING DEMAND End consumers The ingredients sometimes are not liked by the ultimate user and the manufacturers need to change the product Sudden change of preference from one product to another (semi automatic to fully automatic washing machine or direct cool to frost free refrigerators, one model of car is suddenly liked by the market A Maruti or Nano effect)

Business conditions General economic conditions taking a dip or jump The customer losing business to competition Seasonal demand sometimes hampered by changes (rains in May/June affecting sales of ACs or room coolers

Financial conditions of the customers

Demand

Price For consumer products the demand may increase if the prices are reduced i.e. an inverse relationship exists while in the case of industrial products the demand normally does not change unless the reflection of price on the finished product is very high and the demand for the ultimate product goes up Case of Tetra Pack

However in the case of equipments and machineries the change in prices do not impact the demand

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Demand issues

Short term demand Normally short term demand is calculated by projecting the sales based on the previous data available and the expected demand pattern of the ultimate product Though it a crude method, but with the least variables and the experience of the executives working in industry, helps in setting the short term demand of the product

Long term demand Whereas long term demand would involve many factors at macro level, such as;

1. The growth of the GDP of the country

2. Growth of the industry itself and the related industry 3. Spending pattern of the people 4. Study of the consumer behaviour

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Demand issues

5. Expected increase in the earnings 6. Socio-economic pattern and the changes expected (middle class and the upper and lower middle class and the change of this pattern over time depending upon the government policies with regard to employment and other social securities) 7. Policy of the government towards existing industry and the external factors like imports (including the duties imposed by the government and free trade agreements with the countries 8. Developments in the field which force customers to replace products faster (of course also depends on the price of the products - products getting cheaper with enhanced technology and competition).

Demand

It is therefore very necessary that the forecasting of the demand is made as scientifically as possible The seller needs to take care of the following; Keep a proper record of the past performances of 1. Own company 2. The customers

Competitors past performance as well as activities on developments and investments (including new entrants)
Global developments on products and replacements if any Technological innovations and developments which may affect present products Close liaison with customers, suppliers and markets Regular scheduled meetings with customers Relate demand to the ultimate demand and study the impact.