Editorial: The Changing Role of Sales Forecasting within the Organization

By Chase, Charles W., Jr. | The Journal of Business Forecasting Methods & Systems, Spring 1996 | Go to article overview

Editorial: The Changing Role of Sales Forecasting within the Organization


Chase, Charles W., Jr., The Journal of Business Forecasting Methods & Systems


The nineties have made information one of the most important commodities in our business environment. The companies with the best information, and who have learned how to manage it effectively have prospered over the competition. This need for accurate information has compelled companies to re-define the responsibilities of Sales Forecasting and Marketing Analysis. To truly understand the implications surrounding these changes one must recognize the evolving roles of the sales forecasting process. During the past several years sales forecasting has become a segmented discipline supporting two separate roles, both not necessarily mutually exclusive of one another. The first, can be described as "Tactical" or demand forecasting. Demand forecasts are essentially sales forecasts of consumer demand at the customer(account) level utilizing P.O.S. (point-of-purchase) data. In turn, those projections are compared to customer inventory resulting in a customer demand order. This is the difference between order forecasting and sales demand forecasting. The primary purpose of sales demand forecasts is to drive manufacturing and replenishment requirements associated with Efficient Consumer Response (E.C.R.). E.C.R. is a pooling of retailer and manufacturers resources to obtain knowledge through the use of information and technology to improve marketing decisions and customer service. Together, the retailer and manufacturer increase shelf turns and market share both of which grow the business and improve profitability.

The second role of sales forecasting can be referred to as decision-support forecasting or "Strategic" forecasting. Strategic forecasting focuses on producing regional level sales projections that assist management in the development of the financial budget, marketing plan, and longrange strategic business planning. Subsequently, providing management with detailed business analysis (i.e., price sensitivity, media responsiveness, and event analysis) of the business drivers that influence sales demand. In other words, tactical demand forecasting tends to be more short-range sales/logistics based, while strategic sales forecasting is more long-range marketing/finance oriented. Both roles require similar proactive statistical methodologies that integrate those business drivers impacting the business, such as price, advertising, coupon drops, consumer/trade events, and competitor influences. The differences occur as we begin to look at the business in a more finite manner (i.e., regional or account-specific slices). In these particular situations data requirements change significantly. The need for account specific and/or regional level historical information becomes extremely important depending on the purpose or role of the sales forecast. Furthermore, managing this additional information requires more complex system capabilities, and integration of Field Sales information, as well as customer point-of-sale (P.O.S.) data.

The enabling systems supporting the sales forecasting process should have the ability to interactively gather all the pertinent information required to provide actionable decision-support analysis.

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