HOW TO IMPROVE SALES FORECAST ACCURACY?
Why is it crucial to improve Sales Forecast Accuracy?
An accurate sales forecast enables having the right products in stock at the right place on time, ensuring a higher service level and reducing obsolescence risks notably. It also contributes to increasing market share and enables reaching the potential revenue.
It helps build solid bridges between all the stakeholders of the different planning processes within the organisation (finance, sales, operations). These stakeholders are thus able to make plans for supply, financial and sales appropriately.
Moreover, by improving Sales Forecast Accuracy, Executives are provided with more precise visibility of global activity. It enables them to properly assess risks and opportunities, together with the supply chain’s ability to respond to the customers’ demand since accurate data is shared all along the supply chain.
Improving Sales Forecast Accuracy thus increases companies’ credibility in the eyes of their trading partners (including customers, distributors, suppliers and brokers) and makes their relationships stronger and more sustainable.
KEY PERFORMANCE INDICATORS (KPI)
What are the challenges companies are facing when improving Sales Forecast Accuracy?
Not considering forecast as a sales target
As the demand plan is the key input for supply planning, it may be driven by ensuring that products will be manufactured and distributed to be available on the shelves. However, this should not be the purpose of the demand plan. It has to reflect consumers, customers and market behaviours so that the entire organisation has reliable visibility of the business. It must enable the company to make the appropriate decisions at all levels, whether operational, tactical or strategic.
Not thinking in silos
Sales Forecast Accuracy is a shared responsibility. Even when led internally by a subset of people, forecast improvement is everybody’s business for all internal stakeholders and the entire external ecosystem. Therefore, it is crucial to properly structure the organisation around the forecast and make it effective. Only accurate data with good process discipline and clear roles and responsibilities prevent companies from offloading the burden onto the forecasters when everyone unknowingly biases the forecast.
Fostering mutual trust and process responsiveness
As soon as silos are broken, demand planning becomes an intensely collaborative process. The same goals and targets must drive all stakeholders to sustain such a process. Thus, it is critical that all stakeholders provide the correct information in a timely manner to deliver an effective and accurate demand plan. This mutual trust within the organisation will lead to achieving the targeted forecast accuracy and a virtuous circle with continuous improvement. Indeed, demand planning is a journey, and one of its most important achievements is the ability it always provides to target better performances.
Covid-19 impact on Sales Forecast Accuracy
Accurately forecasting a baseline in a volatile world is not an easy task. Expecting predictions to be close to reality during unpredictable black swan events, like the Covid-19 crisis, could appear unrealistic. Nevertheless, companies that have good data-driven process discipline in place combined with effective collaboration and appropriate analytics are more prepared than others, which leaps them ahead of the competition. They are more agile, better at understanding and mitigating risks, and even able to foresee opportunities.
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In this white paper, you will also learn:
- Who’s concerned by improving Sales Forecast Accuracy?
- Why is it crucial to improve Sales Forecast Accuracy? What are the Benefits?
- How to improve Sales Forecast Accuracy? – The 5 Key Pillars
- How FuturMaster can help you improve your Sales Forecast Accuracy?