Enhancing Supply Chain Management Through Sales Forecasting

Enhancing Supply Chain Management Through Sales Forecasting

M
by Micah James — 6 months ago in Supply Chain Management 3 min. read
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Sales budgeting and forecasting are crucial in every industry, but if you’re involved in supply chain management, forecasting is a 100% necessity. Maintaining a healthy supply chain may mean that consumers worldwide have access to more affordable products.

What is Sales Forecasting?

If you sell a product or service, sales forecasting allows you to:

  • Estimate future revenue
  • Understand “potential” sales
  • Break down sales by month, quarter, year, or even in micro increments

Multiple elements are integral to the forecasting process, including but not limited to:

  • Historical trend data
  • Changes in sales offering (price, services, etc.)
  • Market trends
  • Forecasting period
  • Competitor changes

Sales forecasting looks at all of these data points to help shape your forecast. If, for example, you made $10,000 in sales last month and this month has historically 20% more sales, you’ll have the potential of $12,000 in sales.

While this example is very basic, it shows how, with just a bit of historical data, it’s possible for supply chain management companies to prepare for the future.

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Why Sales Forecasting is Critical for Supply Chain Management

Sales forecasting may not change the face of your operations if growth or contraction is minimal, but it will have a dire impact in other scenarios. You gain insight into the future of your business, such as:

  1. Times when you should invest more money into your operations to maintain satisfactory contract completions and turn away less business.
  2. Identify market trends and take precautions to adapt to them to either maximize revenue or minimize revenue loss.
  3. Securing funds to help cover operating costs during slow periods where cash flow has the largest impact on your business.

Your business must maximize the utilization of equipment, and forecasts can help. Having raw materials sitting in a warehouse is bad for business, and if you can help companies move these goods to target markets in the most efficient way possible, it will help strengthen the supply chain.

Forecasts are insights into what may transpire in the industry and allow you to understand how much product is necessary to meet targets.

Understanding The Process of Sales Forecasting

Sales budgeting and forecasting are both data-centric ways to transform your business based on what may transpire during a given time period. For example, you can run forecasts for a week, month, quarter, or even a year.

Forecasting will consider:

  • Historical data
  • Current trends
  • Projected trends
  • Market conditions

Forecasting goals may be set, and you’ll want to add variables to the forecast, such as what happens if sales are 10% higher or lower than projected.

Large supply chain companies run multiple forecasts with high and low projections so that they can have a best- and worst-case scenario forecast.



Best Practices for Implementing Sales Forecasting in Supply Chain Management

Sales forecasting should be a part of your supply chain management operations. However, it’s important to ensure that you’re using the best practices for implementing forecasting.

It can be challenging to get it right when you’re creating sales forecasts. These best practices can help.

Standardize Your Sales and Forecasting Processes

One of the most important steps to take is to standardize your sales processes. Creating standardized processes ensures that everyone is on the same page and using the same terminology. It eliminates confusion, so forecasts are based on accurate information.

Along with your sales processes, it’s important to standardize your forecasting process. Develop a consistent procedure for forecasting and reviewing your forecasts.

Every month, you should be evaluating past forecasts and comparing them with actual outcomes. These comparisons can help you improve your processes and forecasting accuracy over time.

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Ensure Teams are Accountable

Sales forecasts rely on data, and that data must be up-to-date and accurate if you want your forecasts to be reliable.

However, gathering accurate data can be challenging if you have multiple teams working independently.

Have systems and partnerships in place to ensure that teams are working together to hold each other accountable.

Maintain Accurate Data

Accountability is only one piece of the puzzle if you want to ensure that your data is accurate. Implement a realistic, reliable, and efficient process for collecting data.

Factors Influencing Sales Forecasting for Supply Chain Management

Sales forecasting has many benefits and can help improve supply chain management operations. However, it’s important to remember that forecasting still has limitations. A number of factors can influence the accuracy of the forecast.

Some of the most common factors influencing sales forecasting include:

  • Budgets
  • Marketing spend
  • Customer satisfaction
  • Economic or political conditions
  • Competitors
  • Industry trends

These external factors can impact your sales forecasts, and they should be taken into account when creating your forecasts.



In Conclusion

Sales forecasting can enhance supply chain management by helping leaders identify issues ahead of time and correct the course to minimize the damage or avoid it entirely. Taking steps to implement forecasting processes and using the best practices will help your business stay one step ahead.

Micah James

Micah is SEO Manager of The Next Tech. When he is in office then love to his role and apart from this he loves to coffee when he gets free. He loves to play soccer and reading comics.

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