Forecasting : The Guiding Factor For Industries

Forecasting : The Guiding Factor For Industries

In corporate world, today’s action is based on yesterday’s planning and tomorrow’s expectations and in the process future planning cannot be done without forecasting events and their relationships with other events. One of the forecasting is sales forecasting. Now the question arises what is forecasting, so in simple words forecasting means to predict future or to guess what will happen in future. Now it comes to sales forecasting, according to American Market Association “sales forecasting is defined as an estimation of sales in in monetary value or physical units for a specified future period under a proposed marketing plan or program and under an assumed set of economic and other forces outside the unit for which forecast is made.


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Forecasting is a technique that uses historical data as inputs to make informed estimates that are predictive in determining the direction of future trends.


Why Sales Forecasting is Necessary?

There are combined factors that are present in system worldwide that affects the sales and some of the factors are seasonality of business, relative state of economy, direct and indirect competition, weather, political status etc. and due to sales forecasting is important. It is very essential for industrial enterprise. In production units the sales forecasting is important because it can vary problems of producing and distributing the products. So in this, sales forecast acts as guiding factor for the firm. It enables a firm to produce actual quantity and required quality product and due to this proper arrangement of resources, manpower, raw material, equipment etc. can be done. Or in simple terms we can say forecasting is helping us in anticipating demand. Now there is one important thing that is to be kept in mind that forecasting will work only if it applied in an accurate manner. So the main thing is accuracy of forecasting.


Forecasting models

There are some standard forecasting models that are widely popular, they are:

Survey of buyer’s intention or the user’s expectation technique.

Collective opinion or the sales force composite technique.

Group executive judgment or executive judgment technique.

Expert’s opinion technique.

Analytical and statistical methods

Delphi method.


Survey of buyer’s intention or the user’s expectation technique: 

In the technique, the actual users of the product are contacted directly and asked about their intention to buy the company’s product in an expected time, usually one year. Total sales forecasts of the product are then estimated on the basis of advice and willingness of various customers. This is more direct method of sales.


Collective opinion or the sales force composite technique: 

In this technique, views of salesman, branch managers, area managers and sales management are secured for different segments of the market. The salesmen, being close to actual users are required to estimate the expected sales in their respective territories and sections. The estimates of individual salesman are then consolidated to find out the total estimated sales for a specific period. These estimates are further examined by successive executive levels of the organizations in the light of various factors like proposed changes in product design, advertizing, selling price and competition etc before they are finally merged for forecasting.


Group executive judgment or executive judgment technique: 

This is the process of combining, averaging or evaluating the options and views of top executives in some other way. In this method, the opinions of different executives in different field such as marketing, finance productions etc are gathered to make forecast.


Expert’s opinion technique: 

In this technique, the organization collects opinion from specialist in the organization. This expert’s opinions are collected from the newspaper, wholesalers and distributors for the company’s product, and professional experts. By analyzing these opinions, deductions are made for the company’s sale forecast by the experts.


Market Test Technique: 

In this technique, the salesman sell the products in a part of the market for some time and evaluate the sales for  the  full market on the basis of the results of the test sales. This technique is appropriate when the product is quite new in the market or good estimators are not available or when the buyers have not prepared their purchase plan.


Analytical & Statistical Method: 

Basically all analytical and statistical methods of forecasting project historical information into the future. These are base on the assumption that future pattern tends to be extension of past ones, and that one can make useful predictions by studying the past behavior. This method covers moving average method, exponential smoothing method and regression analysis – Least square method.


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Illustration : Revenue increase


Now there is standard procedure that constitutes the process of sales forecasting. The following are the main steps in demanding forecasting:

Determine the objective of forecast.

Subdivide the task of forecasting.

Determine the relative importance of factors.

Select the method to be used for forecasting.

Collect and analyze the data

Study the correlation between sales forecast and sales promoting plans.

Study of competitors activities.

Prepare final sale forecasts.

Evaluations and adjustments.



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