The road to optimal forecasts. 5 tips for better and more precise forecasting in your company

Author Sine Mølgaard


Many companies rely on precise forecasts – among other things, because they work with ever-growing supply networks, both nationally and globally. Furthermore, they often have to plan earlier, for a longer time frame and for larger sums than previously.

The forecasts that typically have the biggest impact on the day-to-day business are the periodic sales forecasts, which are used for operations planning and procurement. Below, we provide some tips on how to work actively at optimising your sales forecasts.

Identify needs and stay focused on the goals

The purpose of a forecast is, among other things, to be able to allocate resources before the customer-driven need arises. Companies naturally focus on making forecasts for the areas that have the biggest impact on their operations.

This means that it might be necessary to examine your planning procedures and identify where you need to focus on forecasts. Planning and the underlying processes can then provide the specific forecasts with a series of concrete goals such as generating capacity plans and deciding stock volume.

Forecasting usually involves several employees, which increases the likelihood of losing sight of the forecast’s purpose. If this happens, your forecasts will not be prepared in time, nor will they have the right time frame or the required precision.

It is important that the employees know that a forecast might have several purposes. For example, the same forecast can be used to determine production capacity, determine stock levels and initiate production orders and purchase orders.

Determine requirements for time frame and precision

The longer the time frame you need to plan for using forecasts, the more important the precision of these become for the company’s performance. This also means that it might be necessary to prepare various forecasts with different time frames for the same product, which may create a substantial need for coordination.

However, in many companies the individual departments prepare the forecasts for that particular department’s use. This typically means that there is more than one forecast per product in the company, thus increasing the risk that Production uses a forecast that is in direct conflict with the one Procurement uses.

All requirements for time frame and precision must be formulated and communicated clearly. The time frame a forecast should cover is naturally delimited by how long before the arrival of an order the company needs to allocate resources to be able to meet the order.

Watch out for period deferrals in the sales data

In order to ensure stable production and planning, it is crucial to prepare forecasts based on the most accurate data possible. With regard to sales forecasts, this means that you should use sales data obtained as close to the company’s end-users as possible.

Many operational forecasts are based on the sales from the latest periods. However, this might create a problem if a large order is pushed from one period to another (for example due to delivery problems or customer requests). This means that the sales are suddenly higher than normal in one period while it is lower in another.

This type of period deferral can easily cause problems when preparing forecasts. Consequently, it is important to register when the customer was supposed to receive the product as opposed to when it was actually delivered.

Systematise your forecasting technique

Companies often have an ad hoc approach to forecasts, which means that they are prepared differently every time. This makes it difficult to follow up on the forecasts and incorporate them in the daily operations. A systematic approach to the preparation and use of forecasts is therefore of great value.

Without a systematic approach, it is difficult to achieve satisfactory precision and timing just as it can be difficult to explain why a forecast missed the marked.

Using software solutions that are suitable for forecasting will make the systematisation of your forecasts easier just as it often makes it possible to prepare forecasts that are more precise. Furthermore, data registration and analysis become more simple and efficient.

Visualise the consequences of mistakes

Forecasts are often prepared by employees who subsequently do not use the forecasts themselves or by employees who need the forecasts but lack the necessary knowledge of the market.

As a result, it is important to follow up on mistakes in the forecasts and make sure all involved employees understand the consequences of poor precision and quality.

Furthermore, the process should include decision-makers as well as those who prepare the forecasts. This will help ensure common priorities and a forecast that is accepted and used by the entire company.

Forecasting via InfoSuite

Many conditions and circumstances affect your forecasts and understanding these as well as taking them into consideration when designing the forecast process is of great importance.

A well-designed forecasting process will enable you to align your operation so it matches your customers’ orders as well as enable you to plan future capacity in relation to procurement, production and stock.

With an integrated Business Intelligence and planning tool like InfoSuite, you get the necessary knowledge as well as an easy and user-friendly tool for preparing valuable and forward-looking forecasts. Not only at an overall level but at the level of detail you want.


Want to read some other articles?

We have collected a number of articles and inspiration here.