Business forecasting methods and levels of sophistication vary greatly. It involves the collection and analysis of hard data, and their interpretation by managers with proven business judgment. Every forecast will be used to assess future situations that will affect the business’ efforts either positively or negatively.
It is important to analyze a broad spectrum of economic, demographic, political, and financial data for indications of growing and profitable markets. Individual departments such as sales, and divisions such as manufacturing, also engage in the process of forecasting. Sales forecasting is essential to setting revenue goals.
With the objectives and forecasts in place, management decides what actions and resources are necessary in order to bring the forecast in line with the objectives. The basic steps management plans to take in order to reach an objective are its strategies. Strategies exist at different levels in an organization and are classified according to the level at which they allocate resources. The overall strategy outlines how to pursue objectives in light of the expected business environment and the business’s own capabilities.
From the overall strategy, managers develop a number of more specific strategies for each business function. Although forecasting is a function of looking to the future it is really about everyone working together.
- S&OP: More Than Forecasting (Part 2) (business2community.com)