3.3.1.Quantitative Sales Forecasting

Question 1

Sales forecasting necessary:

Answer 1

Helps with all business planning:
-HR plan
-Cash flow forecast
-Profit forecasts and budgets
-Production planning

Question 2

Identifying past trends

Answer 2

1. Moving averages- add first three months and find average for those and centre figure on middle of period. Move along each time. To smooth out data and identify trends.

2.Extrapolation-predicting future by assuming past trends will continue.

3.Scatter graphs (correlation)- Plotting relationship between two variables. Relationship can be used to forecast sales if the other variable is controllable or predictable ie. Can be positive or negative.
Sales and temperature

Question 3

Limitations of quantitative forecasting techniques

Answer 3

Future≠Past: changes in any external factors may have significant impact on sales. Unpredictable to forecast.

Quality of forecast is reliant on ability of forecaster to interpret data being used to generate the forecast.