Sales Forecasting is the art of anticipating what buyers are likely to do under a given set of conditions. This suggests that the buyers should be surveyed. Surveys are especially valuable if the buyers have clearly formulated intentions, will carry them out, and will describe them to interviewers. ; Sales forecasting is estimating what a company’s future ales are likely to be based on sales records as well as market research.
The information used in them must be well organized and may include information on the competition and statistics that affect the businesses’ customer base. Companies try to forecast sales in hopes of identifying patterns so that revenue and cash flow can be maximized. What is Forecasting? 0 Process of predicting a future event based on historical data 0 Educated Guessing 0 Underlying basis of all business decisions Production Inventory Personnel Facilities Importance of Departments throughout the organization depend on recasts to formulate and execute their plans.
Finance needs forecasts to project cash flows and capital Human resources need forecasts to anticipate hiring needs. Production needs forecasts to plan production levels, workforce, material requirements, inventories, etc. Demand specifications not the only variable of interest to forecasters. Manufacturers also forecast worker absenteeism, machine availability, material costs, transportation and production lead times, etc. Besides demand, service providers are also interested in forecasts of population, of other demographic variables, of weather, etc.
Types of Forecasts by Time Horizon ; Short-range forecast Quantitative methods – Usually < 3 months ; Job scheduling, worker assignments ; Medium-range forecast Detailed use of system - 3 months to 2 years ; Sales/production planning ; Long-range forecast - > 2 years ; New product planning Design of system Qualitative Qualitative Forecasting Methods Executive Judgment Sales Force Composite Market Research/ Survey Smoothing Models Delphi Method Qualitative Methods The qualitative methods are: Executive Judgment: Opinion of a group of high level experts or managers is pooled
Sales Force Composite: Each regional salesperson provides his/her sales estimates. Those forecasts are then reviewed to make sure they are realistic. All regional forecasts are then pooled at the district and national levels to obtain an overall forecast. Market Research/Survey: Solicits input from customers pertaining to their future purchasing plans. It involves the use of questionnaires, consumer panels and tests of new products and services.
Methods Delphi Method: As opposed to regular panels where the individuals involved are in direct communication, this method eliminates the effects f group potential dominance of the most vocal members. The group involves individuals from inside as well as outside the organization. Quantitative Forecasting Methods Regression Time Series 1. Naive 2. Moving Average a) simple b) weighted 3.