Sales Forecasting and – more importantly – Demand Planning are critical business processes in today’s uncertain global climate. It is more important than ever for businesses to make realistic forecasts – updated weekly or monthly – to include the latest changes in assumptions which relate to key variables like the political landscape, the price of oil, inflation, pricing, promotions, and competitive activity. Even more, you need to build scenarios that enable you to plan better. You will avoid inventory, improve responsiveness to customers and remain ahead of the game.
Not only is the process of forecasting difficult because of the nature of the outside world, but companies make it even more difficult by having the wrong set of performance measures and responsibilities to drive their commercial and supply chain operations.
We believe it is vital for Sales and Marketing to take ownership of the sales forecast and be accountable for the accuracy. They should also be accountable for the cost of holding and writing off finished goods inventory.
A good Sales Forecasting and Demand Management process will deliver the growth and ambition that many companies seek to achieve. In the same way that operations should ‘plan the work’ and then ‘work the plan’, so Sales and Marketing should ‘plan the sale’ and then ‘sell the plan’ – it is not about trying to guess the future. Demand planning is about recognising the demand for your products, and then putting in place a plan for capturing customer demand. But in so doing it is vital to communicate to the Supply Chain function what they need to provide and to Finance what cash you expect to need to support your customers’ and consumers’ demand.
The Need for a Sales Forecast
We show why a forecast is needed, to communicate to operations, finance and technical the requirements for cash, people and equipment. HR also needs to know the requirements for skills now and in the future. We illustrate the need to develop this forecast based on volumes at a SKU and family level and in financial terms.
Structuring the Sales Forecasting Process
We share with you and your delegates the structure of a best practise process, which goes from creating a statistical forecast, through to including all commercial information (promotions, advertising, new products, competitive activity) into the forecasting process. We show how to measure forecast accuracy and bias and more importantly how to use the data to improve the forecasting process. We also show how to use scenarios to deal with major uncertainties. Above all we help you create an ‘assumptions map’ to make sure the basis of the forecast is explicitly recorded.
Sales Forecasting Process and Performance Measures
Many companies destroy the quality of their forecast data by having the wrong performance measures. For instance, sales are rewarded on beating the forecast; hence they will forecast low to sell high and get a pat on the back. So, we show how to measure forecast accuracy (or error) and how to measure forecast bias. Using ‘Fishbone’ and DMAIC analytical techniques, we show how the forecasting process can be improved.
Forecasts will inevitably be wrong. However, we see companies fail to have an effective process for identifying abnormal demand at point of customer order entry and to programme their computers correctly to consume the forecast and calculate ‘Available to Promise’. So, we show how to identify abnormal demand and how to establish a policy for the management of abnormal demand. We show how to set safety stock and safety stock correctly – not just a standard 4 weeks for everything.
Implementation and Avoiding Pitfalls
We have a formal process for the implementation of a good Sales Forecasting process, normally carried out as part of an ERP implementation or an ‘integrated Business Planning’ process. We will show how to structure the implementation and give tips and tricks on the task force activities required. Implementation of a good forecasting process requires a fundamental change in culture and we will share how education must be at the cornerstone of the implementation. We will illustrate how to set up an education programme.
Who should attend?
CEOs, Managing Directors, Sales and Marketing directors, Operations directors, Supply Chain directors, senior managers, project leaders and team members who are wanting to transform the performance of their sales forecasting process.
How will the company benefit?
Development of the process leads to improved visibility, improved communication and a more formal way of handling the demand planning process. The ambition to grow sales and profit will be achieved.
As a result, the company will gain a real improvement in customer service, which will lead to increased profitability – normally around 2% of Sales Revenue. In addition, clients typically achieve 40% less inventory
What will I learn?
- Why your business needs a good sales forecasting process
- The steps required to set up a best-in-class process that delivers a consensus demand plan based on one set of numbers
- How to measure forecast accuracy and bias and how to improve your process
- How to ensure that Sales and Marketing are accountable for the quality and content of the sales forecast
- How to make sure you establish the right level of flexibility for the supply chain to respond to changing customer demands
- How to establish the sales forecasting and demand management process and make it work
- How to avoid the pitfalls that prevent the acceptance of new ideas