In best in class companies, sales forecasts are key inputs to all major operational planning – sales, marketing, finance and supply chain. As such generating accurate 3,6,12 month sales forecast is critical to optimal operational execution and enables companies to proactively manage emerging trends in the marketplace. Prescriptive Insights has substantial experience in the area of sales forecasting and based on the various projects we have completed for our clients, we have identified eight key components that are essential for developing a robust sales forecasting process.
- A comprehensive and standardized data (both historical and current) repository which contains a range of dimensions and measures needed for a wide range of analysis. Ensure all operational tactics are incorporated in the repository.
- Develop and assign attributes (operational / transactional, demographic and psychographic) to every single customer that is contained in the data repository. Ensure rapid analysis of numerous permutations and combinations of attributes that create a logical segment.
- Identify / develop customer and market segments & clusters that display consistent and predictable behavior in terms of operational KPIs.
- Develop forecasting predictive models that incorporate internal and external variables, time series elements of trend and seasonality and allow for ‘what-if scenarios’. Analyze historical trends and produce an accurate baseline from which forecasts can be generated.
- Analyze model outputs and identify high impact drivers of sales forecasts.
- Compare forecasts with actuals and identify reasons for variance. Identify potential adjustments needed and incorporate adjustments into the models.
- Develop a repository of exception items that impacted forecasts. These exceptions will be used for future reference while developing models.
- Ensure prompt dissemination of forecasts to all key stakeholders and collaboratively develop strategies to address gaps and opportunities.
By adhering to the above mentioned practices, companies can realize the following benefits:
- Proactively manage the business
- Identification of specific customer segments that need attention
- Understand specific drivers of forecasts and their impact on operational planning
- Optimize sales and profit growth