Is Sales Forcasting a Myth?

I completely agree with Zion, yes Sale Forecasting in smaller organization may seem as a waste of time and money but for larger and more diverse organization is is a must do. There is no way you can even know your targets if you do not forecast your sales in advance. There is every possibility of losing focus and going out of track.

Hi Kanikaa, good to see your comments on this topic. I am perfectly in sync with your viewpoint and they are true only in cases where field sales is the only channel deployed by you for selling. But then, what about companies who have a robust distribution system? They demand consistent replenishment otherwise your costs on lost sales and costs on holding up inventory would jack upto astronomical heights and without doubt they eat into your profits. In this scenario, SF will streamline your operations. I'm sure you will agree with me on this. Thanks.

This is too important as  the management  has to configure  where they would like to see  the company in a stipulated time.The management has to decide based on the resources available,potential market growth ,capital expension plan,and govt.regulations etc..So this assumes lot of imporatnce as it gives the professional of that organisation a vision to realise.

I Agree with the argument that forecasting helps .Forecasting the sales helps in giving direction for achieving goals of the sales team, and the speed with which the sales team have to travel, the direction and also when to switch to the different gears.

the forecasting of sales also helps the other  functions Like production, supplychain ans finance in the organisation to plan their roles better.

Forecasting is a function of demand planning. Demand depends on various elements - seasonality, marketing plans, consumer spending ( festivals ) etc. Forecasts are generally done in reference to historical sales data , this is generally done to get a trend. Then marketing plans get added to the same. Also category growth is taken into consideration. A proper summation of the above leads to forecasting accuracy. This type of forecasting is helpful in retail marketing , as consumer behavior trends are followed and predicted with very less deviation.  However when dealing with wholesale market , forecasting accuracy is a big function of the current SIT ( stock in trade ) levels.

Forecasting is definitely a basic necessity in any business scenario as it is the base of planning. The efficiency of forecasting software can be questionable , but forecasting is very much needed in smooth business functioning.   

Sales forcasting is extremely important for the manufacturing industry as because based on these data management deceide the priority of products to be manufactured

I am from the Building Material Industry, sales forecasting for the quarter or year, would depend on the number of existing projects/new projects. Most of the time than not, these projects tend to get delayed due to various reasons, like finance, govt approvals, planning etc., making the forecast wrong

Over the years, i found that the difference between forecasting and actual business will differ almost 60% to 70% +-3%. To forecast we should know the entire business in the industry. Running projects, Upcoming projects, etc. in a particular territory. Even after knowing these details the fore-cast figure still does not reach or comes close to the actual business completed.

I put in a lot of effort in analyzing why in forecasting there is huge difference. I took details from various sources and found that the Head of Sales has to work overtime in getting the figures right.

In the higher level it is easy for the Head of Sales  to get the salesman to forecast. But deep inside i know its just paper work to show the management and psyche the sales team, pressurize whatever, in ensuring they meet the target.

Forecasting helps when lot of effort is put in by head of Sales, in finding out the current scenario through sources other than the Sales Team. During this time period the Sales team should also make the forecasting Product wise and Project wise.

Now the analysis can be done based on both the inputs and conclude with +- 5%. 

I need to know your views on what  i have penned. I will let you know how far i have succeeded in ensuring the forecast figure is +- difference. I spend a lot of time in collecting data which ensures that I succeed in sales.

Cheers

Benil

This is personal experience. There are two kinds of forecasting. One is IDIOT forecasting based on CRM books, where some Finance Manager or VP imposes targets he read from a fashionable American CRM book, and drums these figures up with showy graphs from Top 5 consulting organizations and runs his organization aground. 

Such organizations show great production, initial sales etc. as the Sales guys have guns to their heads. One such organization showed 45% increase in sales in the FMCG segment.  However, after the final year was over, they showed 80 of those sales coming back as Sales Adjustments or Credit Note. Depots started refusing stocks from   productions, production kept producing (in large volume packs).  Sales guys pressurised distributors to take thsee sales.

Distributors kept them in their godowns, as some of the products had gelled, and not saleable, others were in packsizes the customers did not want.  A cash rich distributor took up contracts to resell, used the advertising materials etc. and pushed his own stocks ahead of this.  The sales guys over a period of time quit the organization and took up Regional Head   positions in some high profile IT products distribution companies.

How do I know all this ?

We had a software with a great algorithm, bring down stocks at depots, and ensure your critical fortnight stocks are satisfied for your A class items. The first fortnight had to be satisfied, and next fortnights would need some storage and some production plans to cater for this.  The   plan would then go and work at product level, and also at the Packing size levels.  For the other class levels, the depot can work out a how many FNs he wants stuff for.  This reqirued a Sales Depot wise  plan owned by the Sales Depot Manager.

This brought forward the anomaly happening with in the organization as a criticial input for the software was stock in transit and stuff lying at the depots.  Forecastnig was done 18 months, seasonality groups and patterns were applied, finance and planning guys would do their own fine turning.  The funda was,  IF WE BRING DOWN YOUR STOCKING LEVELS FROM SAY 5 fortnights to say 3-4 fortnights, how much can  you save ! and what are u willing to pay us - Value based Marketing ...  The software also needed to talk with production plans, so for this it set up inputs to guide   production plans for future fortnights, it had tight self correction mechanisms built in with manager level checks and balances to look and make corrections.

I   personally implemented this stuff into 5 organizatinos, we had 8-10 clients across the country over a period of 5 years, and all this before SAP / Oracle e-biz etc, and Demand Planning etc. were part of the landscape.

Good plans do help, on the other hand stupid Hawa Mahals always crumble down and crash, and these Hawa Mahals only have dust and smokescreens as data, that only leave your eyes burning at any stage of analysis.  Carry your sales and Depot managers well.

There is another aspect also, there are times when a Regional Manager may rotate his star to a slow moving area, and have a guy he does not like to a Star's area with higher targets.  Such politics can also make it difficult to achieve targeted figures and lead to situations where your sales are only challans with Credit Notes to adjust after  you have audited your results.

Knowing and gauging which end of the spectrum you are operating, and validating / auditing this information at Study Analysis level is well worth it.

Yes! Sales forecast is a very good practice to keep sales force on track. When we forecaste a figure we start assuming that  as our target. We plan our strategy  and impliment accordingly  

I disagree with both Ramdas and Parizad....Coming from a research background, I know the pros of having solid ground work and forecasting. It always helps to have a clear picture of what is coming around the corner. Surprises are not always pleasant, being prepared in advance always helps to tackle a scene much better be it sales or any other functionality...