User:Peakdemand/peak demand forecasting

Peak demand forecasting is a type of forecasting focused on predicting extreme high demand events. Peak demand, also referred to as maximum demand, is the highest level of demand within a defined time period.

Demand forecasting
Peak demand forecasting is a type of demand forecasting (see Demand Forecasting). However, demand forecasting is generally concerned with predicting the most likely or expected level of demand in a future period whereas peak demand forecasting is primarily concerned with predicting the level of the highest demand expected for a given period. Hence, the focus of peak demand forecasting is largely on the upper tail of the distribution of possible demand outcomes.

Use of peak demand forecasting
Peak demand forecasting is an important analytical tool in industries and businesses where demand for a product or service is highly volatile and the ability of industry or business to increase to supply (capacity) without substantial investment and/or sufficient lead time is limited.

Peak demand forecasting is commonly used in determining adequacy of existing/planned infrastructure in network industries, where disruption of supply due to insufficient capacity may be lead to substantial financial loss to consumers. Planning and regulatory standards may require sufficient infrastructure capacity to meet extreme high demand level under certain likelihood conditions. Peak demand forecasting is used to assist with the management of production and inventory levels, aiding investment decisions on production and warehousing capacity.

Peak demand forecasting is often used to aid investment decisions for
 * energy, water and telecommunication network infrastructure
 * production and warehouse capacity
 * transportation infrastructure and vehicle seating capacity
 * public and community services delivery
 * entertainment seating capacity

Probabilistic Expectations
Peak demand forecasting is not solely focused on the highest feasible demand level but on the range and likelihood of all feasible levels that demand might peak at in any given period. For some products or services, the range of possible peak demand levels may vary considerably in any given period due to (among other things) seasonal and climatic factors, unusual coincidence of events or consumer preferences.

For this reason, peak demand forecast are often expressed as probabilistic expectations of possible peak demand levels. For instance, a peak demand forecast with a n-percent probability of exceendance (PoE) implies that the projected demand level has a 1-in-(1/n) periods chance of being exceed (as the peak demand) for the forecast period. A probability of exceendance forecast of peak demand expresses the demand level in term of its likelihood of all possible peak demand levels.

Demand forecasts are also sometimes presented as probabilistic expectations. An important distinct is that peak demand forecasts are probabilistic expectations of possible peak demand levels, whereas demand forecasts are probabilistic expectations of all possible demand levels. The latter probability distribution encompasses demand levels that may not necessarily be peak demand for the given period.