203 sales forecasting

Question 1

what is meant by sales forecasting

Answer 1

• predicting future sales revenue based on eg. historical sales data, analysis of market trends

Question 2

(+) of sales forecasting

Answer 2

• workforce plan more effectively - understanding when periods of high sales may occur- business can recruit more workers to cope with extra demand/ redundancies in low expected sales
• plan for expansions- if forecasted sales increasing- invest capital in pending more stores
• stock control- adequate buffer stock /JIT system if they can accurately anticipate future demand- saves cost/storage/ reduce waste

Question 3

(-) of sales forecasting

Answer 3

• depends on consumer behaviour- their tate’s opinions of products can change- trends hard to predict
• depends on actions of competitors- may have better sales for as than the business, and their competitors with a new product cab take sales away from business
• changes in the economy- inflation, change in income- effective ability to spend

Question 4

sales forecasting techniques

Answer 4

• quantitative-> time series analysis by calculating a 3 point moving average
• qualitative -> delphi method , brainstorming, intuition

Question 5

3 point moving average

Answer 5

1. take 3 adjacent figures for each month and divide by 3 eg. for February-> jan(130) , feb(135), march(147) - add then/ divide by 3 = 137.3 -> retreat for all months
2. create a scatter graph
3. line of best fit
4. extrapolation

Question 6

(+) /(-) of time series analysis

Answer 6

(+) little data required, predictions to be made based on established trends
(-) unreliable - significant furcations in data, assumes trends will continue in the future , ignores qualitative data eg.changes in fashion/ tastes

Question 7

intuition

Answer 7

• following an instinct to ‘gut feeling’ to predict future sales

Question 8

(+)/(-) of intuition

Answer 8

(+) no need for data gathering , cheap and fast
(-) gut feeling and expertise shouldn’t to t=be the only guide, prone to bias , should be used in addition to quan and qual data

Question 9

brainstorming

Answer 9

• a group of people discussing their predictions of future sales based on opinions of future trends eg.’ how can we improve the product ton increase sales’

Question 10

(+)/(-) of brainstorming

Answer 10

(+) employee motivation may increase (Mayo) ds working in groups to solve problems / involved in decision making of future products, different perspectives-detailed information gathered-> increasing likelihood of accuracy
(-) time consuming, depends on experience and skill of staff

Question 11

delphi method

Answer 11

• multiple rounds of questionnaires are sent to a panel of experts who work towards a common option of future sales

Question 12

(+)/(-) of the delphi method

Answer 12

(+) participants have time to think through their ideas- better quality responses- accurate, use of experts increases liklihood of accuracy, this method creates a record of the experts group discussion and ideas which can be used when needed

(-) depends on the quality of the experts collected, payment experts may lead to bias in the results, time consuming , assumes all experts are willing yo come to a consensus and allow their opinions to he altered by the views of other experts

Question 13

qualitative methods advantages

Answer 13

• managers/experts use their experience and expertise to make predictions that historical data may not be abe to take into account eg. knowledge of customer trends
• useful where the market is dynamic and fast changing eg. technology

Question 14

qualitative disadvantages

Answer 14

• it ignores quanntititev data that may not be an accurate bias for future sale trends
• bias can exist in the personal options of managers/experts eg.being over optimistic about a new product/sales
• the predictions can be inaccurate and uncertain as it is not using previous data as a basis