So much waste is generated in organizations because we don’t understand the markets that we are trying to sell our products into. Of the total capital tied up in high inventories alone, what percentage is spent on generating and measuring sales forecasts daily/weekly? If we could forecast accurately, by how much could we reduce our inventories and improve the quality of our plans?
Most forecasting is judgmental and intuitive. Unfortunately, many times companies use judgmental forecasting where they should not. In many cases forecasting is confused with goal setting!
If sales people are asked to forecast sales, these figures then become their sales targets and the yardstick by which they are measured. These sales forecast are normally driven to a great extent by budget. What does this really have to do with actual customer demand?
SMALL BUSINESS VIEW
In a make-to-order business (as many small businesses are), your demand forecast is driven by your order book. However, with this, you have a fairly short planning horizon. So, how do you see beyond the order book to plan growth in your business? Find the demand forecasting technique that works for you and use it to plan your business; monitor actuals vs planned; and avoid surprises.