Sales forecasting is an essential component within any company or any sales-driven organization due to the need for accurate forecast for production to be able to ensure that they have the product on hand. Accurate forecasts offer useful insights on future revenue and aid in developing a business plan for the future, but concerns about the time involved to prepare forecast and the biases of sales professional may make them less attractive.
Before implementing and utilizing sales forecasts within your operation, it is essential to understand the advantages and disadvantages associated with utilizing the forecasts and ultimately ensuring that it is the best option for your operation. Therefore, here are the advantages and disadvantages of sales forecasting within operations.
Advantages and Disadvantages of Sales Forecasting
The advantages of sales forecasting pertain to the following:
- Alignment of Strategy and Results - When utilizing sales forecasting and having it align with a company’s business strategy, it enables for the right resources to be allocated at the right time. A company with a goal of increasing its customer base through 10 percent, may be basing this on extensive sales forecasts and allocates the necessary resources to salespeople to generate prospects. It is also important to note a business that utilizes aggressive sales forecasts will also invest more time and money in training salespeople for performance optimization. If incentive pay is also tied to business goals, sales representative are more than likely more motived to hit targets. Having adequate sales forecasts and having it align with your strategy will allow production to be able to generate the amount with the quality that is being promised within the timeframe that is requested. This is why aligning sales and sales forecasting with your strategy and results is by far the most essential aspect when attempting to increase profitability within your operation.
- Opportunities Adjustments - A key advantage of sales forecasting is the opportunity to make adjustments based off of expectations. This is especially important to manufacturing, considering that without making adjustments, the facility will more than likely either generate too much or too little product and produce waste. Adjusting your sales forecast is absolutely essential when attempting to maximize efficiency within your operation and eliminate any inventory. Adjusting sales forecasting based off of expectation can also help through alerting other areas of the company such as marketing, human resources, and finance through developing a more adequate plan for future sales.
The disadvantages of sales forecasting pertains to the following:
- Involvement of Time - Time involvement is one of the key drawbacks pertaining to sales forecasting. Like any forecast, developing the most adequate and suitable one takes a period of time - and it is still more than likely incorrect. Companies will utilize various departments to develop a forecast, which may rely on salespeople, sales managers, or marketers to carry out extra tasks. Regardless of any approach, a company pays for time and resources it takes to prepare sales forecasts. With heavy sales rep involvement in forecasting, there is less time that is spent on phones and in the fields of generating sales. Time involvement is a key aspect to consider within sales forecasting and aids with developing an understanding of how much time and resources to spend within that particular area of the operation. It is also important to note that the more time spent on developing a forecast, the less time the manufacturing operation is able to accurately generate enough product that needs to be sold.
- Uncertain Environment - Uncertainty is almost always prevalent within forecasting. How can anyone be able to 100% predict the future? As salespeople become active in forecasting, accuracy can be affected through excessive optimism, sandbagging to minimize risk of underperformance, or may just be downright incorrect. With any forecasting methods, environmental or industry uncertainty isn't taken into account either. A quarterly forecast may not be prepared for a recession, such as the coronavirus, that takes hold within the middle of the quarter. Therefore, it is important to obtain a form of forecasting software that is agile and is able to be altered as the quarter roles on.
A software that can aid with adequate forecasting and ultimately fulfill any sales obligations is PlanetTogether’s Advanced Planning and Scheduling (APS) Software. APS Software enables manufacturing operations to be able to manipulate production forecasts based off of any changes within demand, sales, or any other component of the operation that have required the process to change. PlanetTogether’s Advanced Planning and Scheduling (APS) Software enables manufacturing facilities to be able to boost operational efficiency, eliminate waste, and ultimately increase profitability. APS Software has become a must for any operation that is seeking to take their operation to the next level and ultimately maintain a competitive edge.
Advanced Planning and Scheduling Software
Advanced Planning and Scheduling (APS) software has become a must for modern-day manufacturing operations due to customer demand for increased product mix and fast delivery combined with downward cost pressures. APS can be quickly integrated with a ERP/MRP software to fill gaps where these system lack planning and scheduling flexibility and accuracy. Advanced Planning and Scheduling (APS) helps planners save time while providing greater agility in updating ever-changing priorities, production schedules, and inventory plans.
- Create optimized schedules balancing production efficiency and delivery performance
- Maximize output on bottleneck resources to increase revenue
- Synchronize supply with demand to reduce inventories
- Provide company-wide visibility to capacity
- Enable scenario data-driven decision making
Implementation of Advanced Planning and Scheduling (APS) software will take your manufacturing operations to the next level of production efficiency, taking advantage of the operational data you already have in your ERP.
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Topics: sales forecasting