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Kultur Dokumente
Sales Forecasting
and Budgeting
PowerPoint presentation prepared by
Dr. Rajiv Mehta
New Jersey Institute of Technology
Chapter Outline
Sales Forecasting and Its Relationship to
Operational Planning
Forecasting Approaches and Techniques
Evaluating Forecasting Approaches
Sales Budget Planning
Preparing the Annual Sales Budget
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Learning Objectives
After reading this chapter, you should be able to do
the following:
1. Relate sales forecasting to operational planning.
2. Use the most popular quantitative and qualitative sales
forecasting tools.
3. Evaluate the various sales forecasting techniques.
4. Identify the purpose and benefits of sales budgets.
5. Prepare an annual sales budget.
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Functional area
Forecast
Too high
Too low
Production
excess output,
unsold products
inadequate output
to meet customer
demand
Inventory
overstock
understocks
Finance
idle cash
cash shortage
Promotion
wasted
expenditures
insufficient
expenditures to
cover the market
Distribution
costly,
inadequate to
insufficient to sell reach market
excess products
Pricing
reductions to sell
excess products
Sales force
too many
salespeople, high
Copyright Houghton Mifflin Harcourt Publishing Company.
All rights
reserved.
selling
costs
price increases to
allocate scarce
products
too few
salespeople,
market not covered
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Analyze
sales
records.
Develop a
preliminary
forecast.
Have
managers
review
and
adjust
forecast.
Build a
sales plan
around
the
forecast.
Make
adjustments
to
operating
plans.
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1.
People
5.
Performance
2.
Process
Successful
S&OP
programs
4.
Strategy
Effective strategy
should align supply
and inventories with
demand.
3.
Technology
Market intelligence
and decision support
system are in place
for reports that assist
in planning.
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1.
Standardized
classification
systems
Estimating
industrial
demand
approaches
2.
Buyer
intentions
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Sales Forecasting
Model: Breakdown Approach
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Forecasting Approaches
and Techniques
based on primary research
1.
Breakdown
approach
Forecasting
approaches and
techniques
2.
Build-up
approach
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1.
Nonquantitative
methods
Sales
forecasting
techniques
2.
Quantitative
methods
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1.
Judgment
methods
Nonquantitative
forecasting
methods
2.
Counting
methods
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1.
Time-series
methods
Quantitative
forecasting
methods
2.
Causal or
association
methods
correlation-regression
econometric model
Input-output models
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Time-Series Methods
Using historical data to predict sales, forecasters look
for the following:
1.Trends are movements in a time series as a result of
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Time-series
methods
3.
ARIMA
An autoregressive integrated
moving average (ARIMA)
model is based on the moving
average concept. The model
incorporates information
about trends by spotting
patterns in the fluctuations in
data.
2.
Exponential
smoothing
Exponential smoothing is
a type of moving average
that represents the
weighted sum of all past
numbers in a time series,
with the heaviest weight
placed on the most
recent data.
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Types of Causal or
Association Methods
1.
Correlationregression
analysis
Causal/association
methods attempt to
identify the factors
affecting sales and to
determine the nature of
the relationship
between them.
Causal or
association
methods
3.
Input-output
models
2.
Econometric
models
Econometric models
are based on a series
of regression
equations.
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Correlation-Regression Analysis
1.
Correlation
analysis
A correlation analysis
helps calculate the
strength of the
association between
two variables.
Correlations do not
imply cause and effect.
Correlationregression
analysis
3.
Multiple
regression
analysis
2.
Simple
regression
analysis
Simple regression
analysis is a statistical
approach to
predicting a
dependent variable
such as sales, using
one independent
variable such as
advertising
expenditures.
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Budgeting is an
operational planning
process expressed in
financial terms, which
provides a guide for
action toward achieving
the organizations
objectives.
Sales
budget
uses
3.
Controlling
function
2.
Coordinating
function
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Common
Common line
line items
items in
in sales
sales
budgets
budgets include
include these:
these:
salaries
salaries
direct
direct selling
selling expenses
expenses
commissions
commissions and
and bonuses
bonuses
promotional
promotional materials
materials
advertising
advertising
All
All management
management levels
levels
must
must be
be fully
fully informed
informed
about
about sales
sales goals
goals and
and
objectives.
objectives.
1.
1.
Review
Review and analyze
analyze
the
the situation
situation
6.
Implement
Implement the budget
budget
and
and provide
provide periodic
periodic
feedback
feedback
Budget
preparation
steps
5.
5.
Prepare
Prepare aa budget
budget
presentation
presentation
Succinct,
Succinct, wellwellreasoned
reasoned written and
and
oral
oral budget
budget
presentations
presentations can be
used
used to
to ask
ask for
for
increased
increased allocation
allocation of
of
funds.
funds.
4.
4.
Develop
Develop aa preliminary
preliminary
allocation
allocation of
of
resources
resources
Assign
Assign resources
resources to
to
particular activities,
customers, products,
and territories.
2.
2.
Communicate
Communicate sales
sales
goals
goals and
and
objectives
objectives
3.
3.
Identify
specific
Identify specific market
market
opportunities and
problems
problems
Sales
Sales managers
managers and
and
salespeople
salespeople should
should use
use
budget
budget resources
resources to
to
pursue
pursue specific market
opportunities
opportunities and
and deal
deal
with
problems
with problems on a
timely
timely basis.
basis.
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