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Improved sales forecasting accuracy frombetter procedures, methods and use of software |
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Sales forecasting improvement programmesCompanies review the matter of sales forecasting for a number of reasons, but at the heart of it is usually the realisation that sales forecasting is a critical process that affects business and supply chain planning throughout the company. Forecast Solutions is happy to help with any individual component of the forecasting system, but is also well qualified to undertake a thorough review of all processes and methods Click here for a case study on sales forecasting process improvement Understanding the current stateThe first stage is to understand the current forecasting system in terms of scope, process and methods. As well as the mechanics it is useful to understand the intent that lead to the current state and the views of all particpants on the strengths and weaknesses that prevail. In terms of currently achieved forecast accuracy, this should be measured on a meaningful basis. A forecast accuracy health check is often useful at this stage.Critical assessment of the existing systemAll parties should then step back and critically assess the current system. It may be that a process installed with due diligence some years ago no longer meets the full business need. A system designed to support short term planning might not adequately fulfil the needs of medium term planning such as that involved in a sales and operations planning process. The effectiveness of current methods should be questioned, as should the results in terms of achieved forecast accuracy.There may be benefits in carrying out causal analysis such as weather sensitivity or econometric analysis investigate is sales are related to weather. If so, there should be consideration of how the results can be used and, if necessary, integrated into the demand forecasting system together with other methods. The role of statistical forecasting should be considered in terms of whether too much or too little reliance is placed on it. Management interventions carried out routinely or to deal with the specifics of promotions or new products should be questioned. Identify and test improvementsPotential improvements should be discussed and prioritised. Of great importance is the organisational and procedural framework within which sales forecasting will be carried out. Effective forecasting usually involves many individuals both inside and outside the business and the necessary collaborations must be supported by the forecasting process. Improvements in detailed forecast technique should also be outlined for potential implementation.Proposed changes should ideally be tested before implementation. In some instances it may be possible to test improvements externally to current systems and Forecast Solutions can often help in this respect. It may be possible to simulate the effects of alternative forecasting regimes and the resulting forecast accuracy before implementing into the live system. Implement and monitorThe agreed changes should be implemented, but it is not enough to implement improved methods and processes and then sit back and enjoy. Appropriate forecast accuracy measures should be put in place and regularly monitored as part of a drive for continual improvement. It is best not to worry too much about industry benchmarks - focus on what is currently achieved in your company and strive to improve steadily over time.Sales forecasting softwareObviously there are practical considerations including the often large investments that may have been made in forecasting software, but software should ideally be regarded as a tool to support sales forecasting, not something that defines the process. Efforts must be made to use existing software in the optimal way, but at the end of the day it may be necessary to consider additional or replacement software. •
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