:Executive opinionUser’s ExpectationSales force CompositeBuild-to-order Executive Opinion:This is the original sales forecasting method and is still the most widely used, regardlessof the company size. It’s done in 2 ways 1)by one seasoned individual (usually in a smallcompany) or 2) by a group of individuals sometimes called a jury of executive opinion.The group approach in turn uses 2 methods 1) key executives submit the independentestimates without discussion and these are averaged into the forecast by the chief executive or 2) the group meets, each person presents separate estimates, differences areresolved and a consensus is reached.User’s Expectation:Consumer & industrial companies often poll their actual & potential customers, rangingfrom individual households to intermediaries. Some companies employ consumer panelsthat are given products and asked to supply information on the product’s quality, features, price, and whether would buy it. Forecast based solely on this method tend to be overlyoptimistic.Sales force Composite:This method is often used to generate forecast in the industrial equipment industry and isthe common practice in the oil-field supply industry. Take for example, a companyselling drilling trucks that when fully equipped sell for $500,000. The firm cannot affordto carry a large inventory and requires that its sales people contact all the potentialcustomers. So each sales person gives an estimate of future sales and his/her immediatemanager reviews the estimates with each sales person. The district manager thenformulates a forecast that is passed up to the regional manager. Corporate managementthus uses the sales force composite forecast to determine how many drilling trucks to be produced for the coming year.Build-to-order:Driven by recurring demand forecasting nightmares and faced with a rapidly changingmarketplace, major desktop computer vendors such as Dell have decided to build final products only after firm orders are placed, a practice called build-to-order.
Mathematical Forecasting Methods
.Test markets:Test markets are a popular method of measuring consumer acceptance of new products.The results from a test market are used to make predictions about future sales. Companiesselect a limited number of medium sized cities with populations that they feel arerepresentative of their customers in terms of such factors as age, income or shopping behaviour. A product is promoted just as if it were sold nationally, and product featuresare then evaluated. Instead of producing hundreds of thousands of dollars on marketing