4.3 Sales Forecasting Flashcards
Sales forecasting
process of perdicting the future sales of a firm
Time series analysis
quantitive sales forecasting methods that predicts future sales levels from past sales data (trend, seasonal fluctutations, cyclical fluctiations, random fluctuations)
The trends
Visible patterns seen after inputting the past sales data, indicates rise and fall of sales over a given period
Seasonal fluctuations
changes in demand due to the varying seasons in the year
Cyclical fluctuations
variations ties to the business cycle in an economy
example: sales rise during groth phase but decline during recession
Random fluctuations
notable unpredictable changes that stand out from a given trend
example: sudden increase in the demand for ice-cream during a rare warm day in winter
Moving averages
sales forecasting method that identifies and emphasizes the direction of a trend
Extrapolation
process of predicting future trends by extending and assuming that current patterns or data trends will continue over time
Variation
difference between actual sales and the trend values
Benefits of sales forecasting
- alignment of an organization strategy for better results
- better cash flow management
- increaseed efficiency knowing the number of goods to produce and to plan for stock required in the future
- better workforce panning
- improved marketing planning
Limitations of sales forecasting
- time consuming to do
- ignore qualitative external factors (political, social and economic factors can influence)
- doesnt take into account the entr of competitors into a market
- based on present technology which can be rendered obsolete
Simple linear regression
comprises tools that predict or describe the relationshop between two variables. scatter diagrams and correlation
