Forecasting for Demand, Growth, or Consolidation
Demand forecasting is one of the trickier analyses because growth is usually not straight-line but occurs dynamically because of a new product or process. Normally, one tries to model future demand by making “best case” estimates.
If in doubt it normally pays to take more space than needed because a space shortage can crimp production and the additional marginal costs is small compared to a loss of sales. Additionally, if done right, the extra space can be subleased until needed.
Overall Strategic Context – What direction is the company heading?
- Growth Management
- Under control with incremental growth
- Out of control growth without strategy
- Consolidation and Disposition
- Migration to lower cost position
- Repositioning
Types of Forecasting Stages:
1. Direct Translation
- Headcount to square feet
- Widgets and product to square feet
- Historical growth and metrics needed
- Straight line charting
2. Extrapolation from Business Indicators
- Non-linear relationships
- Partially subjective
- Sudden growth through new product or invention
- Metrics
3. Bull and Bear Scenarios
- Risks of multiple outcomes
- Modeling and wave analysis
- Minimum and maximum analysis
4. Build in Flexibility
- Land banking, optioning, space banking
- Note space under the curves