Some liken forecasting results to a roll of the dice. Or a shot at the Ouija Board. But no successful company or business wants to gamble on its future. There’s no doubt that accurate forecasts can lead to lower inventories, improved customer or client service, not to mention your overall performance. One rule of thumb, “Never forecast what you can’t calculate.”
If your portfolio company is having trouble reaching first base when you need a home run, you might begin by asking them a few questions. Is the company forecasting as close to your client or customer base as possible? The further away the forecasting the more distorted your customer/client demand signal becomes.
Is your portfolio company forecasting on demand versus sales? Say you go out of stock on a product and make no sales for several periods. Sales history would indicate there’s no demand. Historical demand rather than actual sales will always generate more accurate statistical forecasting.
Ever get the feeling you’re swimming upstream when it comes to forecasting? Then make sure your portfolio company identifies and separates different demand streams. If your total demand history appears unpredictable, have them dig further. You may have a product or service that follows a completely different sales pattern.
As you can see, there are many different factors that affect statistical forecasting. And we only touched on a few. If you find your forecasting results are as unpredictable as the weather, give us a call. We see blue skies ahead.