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
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