Definition The forecast, Target, Functioning, and More
The forecast or sales forecast is the sales estimate we have for a particular time. For this, we will use historical data, evaluations of the marketing team, information from sales professionals, or any other indicator available to obtain the most realistic figure possible.
The forecast can be done from an institutional point of view. The company makes its predictions about the demand for its products so that the different departments, logistics, production, finance, etc., take this information into account in their planning or from a personal point of view.
In such a competitive and complex market, it is essential to know the future in the short, medium, and long term as reliably as possible to optimize planning and invest resources accordingly.
If we use this weapon correctly, we will be able to reduce inventories, reduce the risks of obsolescence of our products, improve coordination between the different business processes by having a common starting point, react to crises earlier and enhance customer service.
It will allow us to detect problems earlier to find solutions that address obstacles before they cause a more significant impact.
There are multiple methods to make a forecast depending on the size and sector of the company. The important thing is that it be as reliable as possible since it is the basis on which we will make decisions that will affect the company’s future.
Multiple Factors condition the Future Demand For A Product In A Company.
Sometimes difficult to determine precisely. Forecasting consists of the estimation and analysis of said future demand through algorithms that analyze many influencing variables, such as sales history, marketing estimates, promotions, campaigns, market studies, dashboards, etc. to optimize the flow of information in the supply chain and prepare the different areas of the organization that are affected.
Typically, these areas involved in the actions that will have to be carry out in the future are logistics, purchasing, production, finance, etc. Forecasting for demand management is, therefore, essential to optimize all these processes and be competitive, profitable, and productive, even affecting the vision and perception of quality by the customer and, consequently, in their loyalty.
The Importance Of The Forecast For Demand Management
Forecasting is considered a vital tool for a company’s success, directly affecting many parts of the income statement and its EBIT. Let us understand that we are talking about calculating a demand that is affect by two typologically differentiating factors:
- tangible factors. Typically, objective business data include historical information on orders, sales, and offers, along with contracts already signed and agreed to deliveries.
- Intangible or future factors. The result of a product launch, seasonal sales associated with a factor the effect of competition, etc. in general, data that are based on estimates, more or less formal, but future in any case. All types of calculations are involve in this type of factor. Future sales based on the impact of a marketing campaign.
Understanding And Predicting This Customer Demand Is Also Essential To Avoid Stockouts
and maintain the correct inventory levels, following the need. Knowing that the perfection of the calculations will not exist but that it will come close to an optimal measure.
Selecting the most appropriate method for the industry and the market situation is essential for the company, as there is no single applicable method. In addition. It is advisable to mix it with the experience and know-how of the company. Together with the statistical techniques that exist. As the most optimal procedure to follow. In this case. Methods base on statistics have create demand forecasting models and algorithms that, depending on the sector and the patient involved. Have a considerable degree of accuracy.
Provide objectivity based on proven calculations in all sectors and industries. Fundamentally, if you have a sale history, estimates can be made base on projections. Historical data generate predictions call ‘time-series. These can be sign in graphs that allow detecting trends, seasonality. How the economic situation of a region has affect the demand, how the marketing or commercial action has affect, etc.
This Method Is A Simple And Simple Method.
As well as being a widely use industry. It is limit to having historical data that can be repeat in the future. The situation of the markets and sectors is changing. The conditions experienced in the past are not always recurrent, are now other competitors. Or because we have another strategy to compete, we are talking about new products or launches. Or because the consumer has changed, etc.
The Importance Of The Forecast For Demand Management Is Growing Every Day.
New data and methods create daily. For example, the use of Big Data includes information on the mass of potential consumers, competition including their behavior. Which was previously impossible to analyze. However. The results of these calculations must be accompanied by the judgment of marketing or business experts to make adjustments. Upwards or downwards. To the Forecasting.