I personally know many big companies, which placed orders with their suppliers in bulk without considering demands in the market and ended up with great financial difficulties. The main reasons of the financial difficulties were inaccurate demand forecasts.

If you are dealing in more than one product lines, you can risk the placement of bulk orders bluntly because loss of over production of one wholesale product can be offset with the profits earned from the other wholesale products. However, the problem starts when a company only deals in single product line. In accurate demand forecasts have two risks associated with them:

1. Risk of under production (More demand and less supply)
2. Risk of overproduction (More supply and less demand

When inaccurate demand forecasts lead to underproduction, you are only able to sell to the few customers. This, if on one-hand, shifts customers to your competitors then on the other hand narrows down your opportunity of earning larger profits. Underproduction also spoils your good will in the market and can even annoy your loyal customers.

On the other hand, when inaccurate demand forecasts lead to over production, it is even more dangerous for the survival of your wholesale business. Businesses are unable to sell the products to the retailers, as enough demand does not exist in the market. Wholesalers are then left with two options, either to store the products for future sales when their demand will be created again in the market or to sell them today at dirt-cheap prices at no profit no loss basis.

Here, too if you are dealing in perishable wholesale items you cannot store them for sale in future. Even if the products are not perishable, the burden of storage cost and the risk of wear and tear and obsolescence prevent wholesalers to do so.

Demand forecasts help in inventory management, production scheduling, and in gaining economy on overall cost of production. So wholesale businesses should always try to be accurate in predicting demand in the market and for that they should research properly the past trends and performance of demand. Though this does not guarantee accuracy of demand forecasts, yet they give a clear idea of future sales.