Forecasting and Forecasting Techniques

4 Main Elements

• The importance of sales forecasting
• Methods and tecniques of sales forecasting
• Why sales forecasting is often unreliable
• How to minimise consequences of poor forecasting

The Importance of sales forecasting

Aspects that critically depend on sales forecasts

• Profitability
• Production planning
• Material buying
• Inventory levels
• Customer service
• cash flow
• Capital and revenue investment
• Employment policy

Methods and techniques

• Qualitative - group discussions, salesforce predictions - main value is cross check.
• Time series - trends, etc - premise is past patterns will continue.
• Model based - regression, market experiment - take past as starting point then incorporate variables.

Which method to use? Consensus that reliance on any one method is unwise.

Why so unreliable? Mechanical difficulties and the human factor.

How to minimise consequences

• Recognise the pressures
• Range forecasting - pessimistic, realistic, optomistic
• Day to day measures
  • Monthly updating of estimates
  • Customers on regular contracts
  • Maintaining reserve of finished goods
  • Flexibility in labour utilisation
  • Materials call-off from suppliers
  • Above all effective communication and co-ordination