4.3 SALES FORECASTING
Potential benefit
know the quantity of material to order and how much to produce
aware on product distribution
resource workforce plan more accurate
cash flow plan more accurate
strategic decision making would become much better informed
Extrapolation Method
basing future predictions on past result
plotted on a time-series graph, then the line can be extended to predict the future
Moving Average
Type
seasonal variation : regular and repeated variation that occur within 12 month/less
cyclical variations : variation sales occur over periods of time of much more than a year
random variation: occur anytime and will cause unusual and unpredictable sales figures
Four-period moving average
widely used technique as it is often employed when forecasting from quarterly data
used because the data clearly vary consistently over this period of time
Benefits: useful for identifying and applying the seasonal variation, reasonably accurate for short-term, can assist in planning resources
Limitations : fairly complex calculation,no consideration is taken of qualitative, newly established businesses will have insufficient data to base moving average