Last week in class we discussed business sales forecasting.  I read the article in the Forbes and it helped with a better understanding of this.  It is very difficult to successfully forecast sales as things may not always be consistent from one morning to the next.  This article helps us understand that although there are many different programs and software out there, such as CRM systems, these can only go so far and can’t understand why numbers are not consistent.  As Christine Crandell says, “Sales remains a black box.”  If just one sales person here and there inaccurately report information, this can have snowball effect and lead to a big difference in numbers.  To combat this, there is micro managing and macro managing to try and keep things streamlined.

By using Big Data and a social business model, companies can now track where the problem is occurring in REAL time to fix this before it worsens and get to the root of the problem instead of digging back and trying to discover the issue.  By discovering patterns and adapting sales teams to acclimate to the always changing environment, companies can maximize on sales and keep customers happier.  It is not necessarily a good thing to just learn the technique and follow it.  It is best to continually change and adapt to what is working.  By using a combination of these two, sales teams and individuals are discussing the most relevant things and making the best possible decisions.  Even if this were not to increase sales, it still allows for a better forecast instead of waking up one day to the next with no clues to why things are not on pace.  This is not to say that what companies or sales people were doing prior is wrong, but is a way to become more efficient.  The techniques discussed in class seemed very simple.

Many companies use complex models but it may not be implementing correct numbers to begin with.  It seems that this article provides an easier and more simple way to approach this.  It just seems right to have more accurate numbers from the start and keep it clean rather than having to go back and spending more time, money, and effort to fix it.  Although it may cost more initially, it is something that I believe will definitely come out in the positive as far as results and satisfaction with forecasting.  Sometimes we just need to be simple and fix something before it is even broken.

 

How important do you think business forecasting actually is in reality and do you think we should generally over or underestimate numbers?

http://www.forbes.com/sites/christinecrandell/2012/02/01/big-data-takes-the-guesswork-out-of-managing-sales/

8 thoughts on “

  1. this is a brilliant idea! expensive (I’m sure), but brilliant. I’m sure companies that can afford to do this, do…and the others unfortunately don’t have the privilege (or financial resources) to do so.

    In response to your question: I think it’s very important for businesses to forecast, especially with our economy today. I work at a boutique pediatric therapy clinic that never forecasted or budgeted prior to the recession and I made the company’s first budget. I could not believe that we did not have a budget in place, but prior to the recession, there didn’t seem to be a need to manage the money since the business was doing so well financially. Now, we have to budget because just like every other business, ours has taken a hit. Forecasting is essential to know how much material is needed, how many hours individuals have to work, and what can be cut down to increase the bottom line. For my budgeting at work, I always overestimate because I’d rather play it safe and have extra wiggle room.

  2. I think this is a great idea but also think it must be expensive. If it is shown to be inexpensive this will be a great tool to help slow down the effects of money loss. Answering you question, I think it is VERY important to forecast in any business because if you don’t, being over or under supplied will leave negative impressions on you either with customers or future investors. If you sold 100 shovels last winter, and this winter is suppose to be worse than last and you order 50 shovels.. you see the problem that exists. On the other side if you order 1000 shovels you will have excess inventory and future investors may see this as a negative sign to your company (that is, you don’t know how to manage inventory.) With an economy like it is today, forecasting is even more important.. you never know what is going to lie ahead!

  3. Wikipedia definition- “Forecasting is the process of making statements about events whose actual outcomes (typically) have not yet been observed. A commonplace example might be estimation of some variable of interest at some specified future date.”

    In this case we are discussing sales forecasting but regardless of the variable of interest, forecasting remains just an estimate and no matter what science or computing resources we apply to make this aspect of forecasting into an exact science, it shall remain an estimate.

    Over or underestimating depends on the specific situation. Overestimation of costly resources can have an adverse impact on business results while underestimating of high demand items would have similar negative impacts. I’d say that its area and resource specific.

  4. Forecasting is important because it gives us an idea of what activities we ought to undertake today to be prepared for the future. Sales forecasts, especially, are critical because of their connection to production volumes. That being said, forecasts will never be perfect because none of us can really know what is going to happen in the future. It is a fundamental flaw in forecasting models that we assume the past will be predictive for the future. Even though this may hold true much of the time, there are no guarantees. Companies would do better to invest in becoming flexible and dynamic than to invest in increasingly sophisticated forecasting techniques.

    Things like just-in-time inventory management and real-time consumer behavior data processing minimize the importance of forecasting and instead allow a company to succeed by being responsive.

    If we do assume that we want to rely heavily on forecasting (or if we think about those aspects of the business that simply must be driven with forecasts), then I think it’s better to compensate in whichever way exposes your firm to less risk. If the company can afford to sit on extra inventory for another season more than it can afford to miss out on getting more sales, then the answer is to overestimate. If the company runs lean and can’t have cash tied up as inventory then it’s probably a better idea to underestimate and forgo some sales in exchange for liquidity.

  5. Sales forecasting is a bit different and more dangerous compared to any other type, in my opinion. Here you may deal with inventory, hiring extra employees because of the new product coming out or the holidays, but if you forecast wrongly, who is there to blame. You may have the best prediction based on the previous data from year before or the corporate office who only deals with numbers may put together a forecast for you even though they never step a foot in to the store or business. I think it should take a team of several different individuals and much of research when predicting sales forecast.

  6. This is a very interesting article. I have never used a CRM system before so I don’t really know how to use it to potential. Sales forecasting is extremely important and necessary. Knowing future results created from past data is key for managers. In any case underestimating data is a better than overestimating. If I were a manager, I would rather underestimate my sales forecast because this can save money.

  7. That seems extremely useful to helping to track the mistakes and not have to backtrack so much. One mistake can really cause a huge error so this system seems useful. Forecasting is very important in businesses because it allows for knowledge of the companies future by looking at past events. It helps to make close estimates.

  8. I agree with JohnD’s response: while estimating sales volume is important to know how much to produce, in the end it is still just an estimate. The blog said this as well, and so did the article referenced in it. Also mentioned in the article was a number of NextBigThings, which were supposed to take the guesswork out sales forecasting, but clearly have not. Therefore, I also believe that companies should not spend a lot of time or energy focusing on new methods of trying to forecast. I’m also a little confused by some seeming contradictions in the article. Early on, she says that B2B buyers want to educate themselves and do not want sales advice or “spin,” making it seem like sales teams should back off a little, but at the end she advised companies to “Automate everything to free up Sales time to spend with buyers,” and stressed building “enduring, profitable customer relationships.” These are things that companies have focused on for basically as long as there have been companies. So I’m not convinced that big data, the newest NextBigThing, is as necessary as the author would make it seem. My aunt has been in sales for decades, last quarter had the highest sales numbers of anyone in her company, and can barely even use Powerpoint. But she excels at building relationships and making sure her customers stay happy.

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