203-Sales forecasting Flashcards
(11 cards)
What is sales forecasting?
predicting future demand of sales. Allowing them to predict HRM needs, financial needs, estimate the quantity and cost of purchases of raw materials as well as determining the production levels
Factors that can affect the reliability of Sales forecasting
-Economic factors - such as interest and inflation rates, exchange rates and economic growth
-Consumer factors - consumer tastes can change, this can be anticipated. However, it can be unpredictable and change quickly
-Competition factors - connot control competitiors actions
Quantitative SF methods
Time series analysis by calculating a 3-point moving average
Qualitative SF methods
-Delphi-method
-Brainstorming
-Intuition
Advantages and disadvatages of using intuition
(+)Cheap and fast
(+)No need for data gathering and market testing
(-)Unreliable
(-)Risky
What is the delphi-method?
group of (industry) experts respond to several rounds of open ended questionnaires and the response is compiled and shared with the group after each round. They can respond to each others opinions until an agreement is formed about what will happen in the future.
advantages of using quantitative sales forecasting methods (3 point moving average) (6)
(+) Helps the business plan ahead
(+) Helps financial planning, including cash flow management
(+) Production planning to determine the right level of supplies are ordered and the production process is efficient to meet either higher levels or lower levels of production
(+) Human resource planning, getting the right number and type of staff in the jobs that are needed. This may mean recruiting more staff, retaining staff or making staff redundant.
(+) Is useful in identifying seasonal variations
(+) Reduces the risk of unexpected surprises that could affect business performance.
Drawbacks of using quantitative sales forecasting methods (3 point moving average)
(-) It is not always easy to predict the future
(-) Historical data is not always a good indication of what might happen in the future
(-) Even complicated sales forecasting methods can get it wrong and no forecast can be correct 100% of the time
(-) Less useful for long-term forecasts
(-) As with all forecasting methods, success is not guaranteed.
Advantages of using the delphi method
(+) It is flexible enough to be used in a variety of situations and can be applied to a range of complex problems
(+) Provides a structured way for a group of people to make decisions
(+) Participants have time to think through their ideas leading to a better quality of response
(+) The Delphi method creates a record of the expert group’s responses and ideas which can be used when needed.
Disadvantages of using the delphi method
(-) The method will more than likely require a substantial period of time to complete as the process is time consuming to coordinate and manage
(-) It assumes that experts are willing to come to a consensus and allow their opinions to be altered by the views of other experts
(-) Monetary payments to the experts may lead to bias in the results of the study.
Brainstorming A01
Brainstorming is a subjective technique for generating new, useful ideas and promoting creative thinking, usually between a group of people. It can be used to predict outcomes based on the group’s subjective thoughts and feelings.
