When there is the difference between forecasting and actual demand which has brought out the potential loss is considered as demand risk
When there is the difference between forecasting and actual demand which has brought out the potential loss is considered as demand risk. Demand risk is usually found in sales, decision in supply chain and etc. which need to depend on the forecasting demand. If forecasting demand is not accurate such as mispredicting of the quantity of the product that customers’ ability and want to purchase, it will give impact on the losses in company performance. So, the demand risk on business has occurred if the company produce too less or too much product to meet the demand.
According to the article, Sime Darby Bhd may be faced demand risks. First of all, Sime Darby Bhd is facing a risk if the demand is over-estimate, they might import and distribute the vehicles quantity exceeded the amount that capable to sell. It may happen when the 0% GST is effective in June 2018, the customers are willing to purchase the vehicles so the demand might increase because of not only the price of the car is reduced , the insurance premiums is also reduced due to the cancellation 6% of GST. If the demand is over-estimate, the surplus of the inventory will cause the company in short of the warehouse space and resources. Sime Darby Bhd might need to reduce more the price to sell out the vehicles in the end which will cause reducing in profit.
In contrast, there is demand risk occurring when the company under-estimated the demand which the company had import and distribute the number of vehicles that less than the amount that able to sell. This may happen when the month before the GST 0% is effective and also after the SST is reintroduced. The demand is lower since the customer would like to wait until the 0% GST is effective in June 2018 or the 10% of SST will be introduced back which may cause the price of the car to be higher. So, it may lead to the shortage. Although it’s looking less critical than the surplus of inventory but the loss of opportunity such as losing the customers.