statistical forecasting

Statistical forecasting is certainly an important component of demand forecasting software but to improve accuracy sales forecasting processes need to embrace human factors and cyclical events. The price of oil is increasingly important lead indicator for a number of sectors - as are interest rates and are policy announcements from Governments - but these more generic influences are often overridden by rules of thumb within a sector - including sector confidence about the future. Rules of thumb include taking previous results and adjusting these for known influences - but unless this is done product by product with educated estimates about the effect of known influences on each major product this approach has limited use - it is not too different to simply "adding 10%" to last years actuals. Of course every department should contribute to the overall process - sharing assumptions between departments means that excesses (high and low) will be quickly identified and have less of a chance to distort the results. Statistical forecasting is certainly an important component of demand forecasting software but to improve accuracy sales forecasting processes need to embrace human factors and cyclical events.

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demand forecasting software

sales forecasting

One proven technique is to take distortion-free historical data that has been smoothed (using techniques like exponential smoothing) to predict recent actuals product by product - the most accurate technique for each product is the one that you use to predict the near future for each product - and the combined effect becomes your overall estimate. Statistical forecasting is certainly an important component of demand forecasting software but to improve accuracy sales forecasting processes need to embrace human factors and cyclical events. That said, once the selling team and operations teams planning process is operating in tandem, both groups soon begin to appreciate that planning is the best way to make their respective lives easier and more predictable - not perfect - but predictable. The 'what's in it for me' for the marketing group will more than likely be that they come to appreciate that the predicated activity is a great way to "reserving" manufacturing capacity or inventory for their customers. The only thing that you can be pretty sure about when it comes to predicting the future, is that your prediction will probably be wrong - the trick is to limit how wrong. Statistical forecasting is certainly an important component of demand forecasting software but to improve accuracy sales forecasting processes need to embrace human factors and cyclical events.