Sales Forecasting

Creating a Process to Ensure Accuracy

As part of its flexible operations practice, GMT offers its clients significant expertise in sales forecasting.

While no sales forecast will ever be completely accurate, GMT’s rigorous, fact-based approach ensures that all relevant issues are being addressed, helps clients to minimize error, reduces expedited orders, minimizes scheduling instability, makes appropriate inventory investments, resolves conflicting operations priorities, and improves customer service.

The result of this unbiased approach yields:

	Organizational agreement that each sales forecast represents the best estimate of future customer demand and is suitable for use in subsequent applications.
	Crossfunctional design that supports use by all groups and avoids conflicting actions across functional departments.

GMT’s Fact-Based Approach

GMT works with client team members to define and implement a forecasting process based on facts, not assumptions. GMT’s approach focuses on:

	Analyzing historic demand. GMT helps clients to gather and analyze in-depth data on historic customer demand—and to manage the effect of highly unusual past and future events (outliers) on the data, which is a key component to minimizing forecast error.
	Forecasting over the right time period. Accuracy naturally decreases as the forecasting period increases. GMT works with clients, and their unique market situation, to define the right time period to yield the most accurate forecast.
	Key components or finished goods. Many times, accuracy may be improved by forecasting key components versus the traditional finished goods approach.
	Applying technology tools. GMT reduces bias and human error by using statistic-based forecasting software to generate a realistic forecast based on customer demand data.
	Creating an environment of continuous improvement. GMT helps clients to develop forecasting performance metrics and to learn from their results on an ongoing basis—leading to a significant improvement in accuracy over the long term.

Answering a Critical Question: What to Forecast?

GMT works with client team members to define and implement a forecasting process based on facts, not assumptions. GMT’s approach focuses on:

	Actual customer demand. GMT works with clients to focus on projecting actual demand levels, not on product sales or shipments, which may not represent the entire market picture.
	Discrete product units. While many businesses project revenue dollars, GMT focuses on forecasts based on individual units, which are the real drivers of production/procurement.
	Key product offerings. For most organizations, 80% of demand volume is represented by just 20% of total offerings. GMT helps clients to identify key products—and to base the sales forecast on these critical offerings.
	Small, lumpy demand. These are the toughest items to accurately forecast. GMT helps clients to develop effective methods of dealing with low-volume, erratic-demand items.
	Major customers’ needs. GMT helps clients to identify and forecast the needs of the primary customers that drive their operations. This is especially relevant for consumer products manufacturers, whose sales are driven by mass merchants and “big box” retailers.

By focusing a client’s attention on the day-to-day factors that drive their business—such as key customers, critical products or parts, and actual unit production—GMT creates a sales forecast that is grounded in reality and positioned for continuous improvement.

New Products: Creating a Realistic Projection

An issue that confounds every business is gauging the sales opportunity for new products—and maintaining a careful balance between meeting market demand and over-investing in inventory. GMT helps clients to meet this challenge through a number of strategies, including:

	Analyzing historic demand for similar products.
	Forecasting over smaller time frames.
	Partnering with customers to project market acceptance.
	Creating an aggregate forecast for similar new products or parts.

While market demand for new products will always be volatile and more difficult to forecast, GMT’s approach helps clients to minimize their risk in this area.

Minimizing Uncertainty to Maximize Profits

It is impossible to create a completely accurate sales forecast—and any business built around the ideal of a highly accurate, error-free forecast is destined to fail.

However, every business can realize improvement in the accuracy of its forecasts by eliminating the element of bias—and creating sales projections based on real-world data. GMT’s sales forecasting process has helped a wide range of clients to achieve this goal—and to maximize their profitability and customer service levels.