Sales forecasting within a cosmetic organisation : a managerial approach

Postiglioni, Renato (2006-12)

Thesis (MBA)--Stellenbosch University, 2006.


Although most businesses require accurate sales forecasts in order to survive and to be successful, very little attention has been devoted to examine how sales forecasting processes should be managed, and the behavioural factors associated with the management of forecasting. Sales forecasting activities and research have by and large concentrated on the techniques or on the systems used, rather than on the forecasting management philosophy, which considers the organisational, procedural, and personnel aspects of the process. Both forecasting modelling and IT systems form the basis for the forecasting process, but the third element, namely the organisation, is potentially the most important one. Researchers have argued that improvements in this area could have a greater impact on the level of forecasting accuracy than improvements with regard to other aspects. After developing predetermined forecasting standards and principles, an audit on the author's organisation was conducted. This revealed that no formal forecasting --- existed, and that a number of business practices were in effect contaminating procedures and possibly affecting the integrity of the data. Very little forecasting knowledge existed, sales were predicted very sporadically, and simple averaging techniques were adopted. Life cycles of products, trends, seasonality or any other cyclical activity were never modelled. This obviously resulted in a very poor level of forecast accuracy, affecting a number of business activities. A decision was made to research the topic of forecasting management, develop a best practice model, and apply it to the organisation. The best practice model was based predominantly on the research work of Armstrong and Mentzer. This model requires the forecasting process to be developed in two specific phases, namely a strategic phase, in which the forecast is aligned to the organisation, the internal processes and the people, and the operational phase, in which more tangible aspects of the forecasting process are identified and constructed. This new forecasting approach and a dedicated forecasting software programme were successfully implemented, improving the overall accuracy level of the forecast.

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