The Forecasting Process
Start the process by developing a reasonable baseline forecast for
the product line under consideration. At this point you want to
develop an annual figure. Review this data with Sales to find out
• Why is it trending? Find out why the customers want this product.
Understand their needs.
• Will the trend stay the same? Are you gaining or losing customer
base or market share? Will a substantial amount of products be added
to or dropped from the line?
With Sales/Marketing input, adjust the trend if needed to get a good
annual forecast. When you have a reasonable baseline established,
you are ready to start adjusting for seasonality.
If no promotions are being planned, start by checking your files to
find another year of history without promotions. But don't just stop
there, talk the Sales and Marketing folks to find out if anything
unusual happened during the historical year, or may happen during
the year under review. You need to consider any substantial
differences between the two years that are important to your
business. Examples might be unusual weather, low mortgage rates that
increased new home starts, or other factors that could have
substantially altered demand for your product.
If no substantial differences are found, you've probably got a good
snapshot of what your seasonality should look like. Use that to
develop the seasonal indices for the year under review. If there
were differences, assess their importance and probable impact, and,
with help from Sales or Marketing, develop a scenario that appears
more likely. The idea, quite simply, is to develop a seasonal
pattern that makes sense in light of the differences, and use that
to develop your seasonal indices.
If a promotion is in the future, find something in your history that
seems the most similar. You could use your Promotion Date files,
Seasonal Index files, history on a product group or individual
items, or anything appropriate that you may have. Now talk to
Sales/Marketing about any differences.
• Timing—Could placement in the year make a difference? Will either
this promotion or your historical example follow closely on the
heels of another promotion which could eat into volume expected?
Is/was one or the other of the promotions in a traditional peak or
• Program Features—Are the Products/Lines/Items the same in both
programs? Will higher or lower discounts change the expected volume
from one to the next?
• Other Influences—Have economic differences changed the buying
habits of customers? Is this a response to a competitor's program?
If there are no differences to speak of, then you've got a good
pattern to use to influence the seasonal pattern of your forecast.
If there are differences, ask for advice on what a more likely
scenario would look like. You don't necessarily need to worry about
getting it down to the last detail with your Sales folks. With the
thorough understanding of the program that you have just gained,
you'll be able to get it down to the right detail and carry the
principle to a variety of products.
To be Continued
stay current on manufacturing
please subscribe to our weekly bulletin, "Manufacturing. Basics
and Best Practices (MBBP)." Simply
fill in the below form and click on the " subscribe
also send you our Special Report, "6-Change Initiatives for
Personal and Company Success."
no cost of course.
personal information will never
be disclosed to any third party.
what one of our subscribers said about the MBBP Bulletin:
articles. Thanks for the insights. I often share portions of your
articles with my staff and they too enjoy them and fine aspects
where they can integrate points into their individual areas of
responsibilities. Thanks again."
Kerry B. Stephenson. President. KALCO Lighting, LLC
Lean Manufacturing Menu
Chain Management Improvement
to Basics" Training for anyone ... anywhere ... anytime
6003 Dassia Way, Oceanside, CA 92056
West Coast: 760-945-5596
© 2001-2007 Business Basics, LLC