Theme 3.3.1 - Quantitative Sales Forecasting

Question 1

What is quantitative sales forecasting?

Answer 1

Quantitative sales forecasting is a method used to predict future sales based on numerical data and statistical techniques

Question 2

What is the main goal of quantitative sales forecasting?

Answer 2

Main goal of it is to provide an objective and data driven prediction, which helps businesses plan inventory, set sales targets, allocate resources and make informed decisions

Question 3

What are the 4 key components that provide a business with insights into patterns and help in decision making?

Answer 3

• Trends
• Seasonal fluctuations
• Cyclical fluctuations
• Random fluctuations

Question 4

How do trends help a business?

Answer 4

Represents the long term direction in which data is moving over time

Question 5

What are seasonal fluctuations?

Answer 5

Refers to regular and predictable changes that occur within specific periods, such as months or quarters, usually within a year

Question 6

What are cyclical fluctuations?

Answer 6

Long term, wave-like movements in data due to economic or business cycles, often over a few years

Question 7

What are random fluctuations?

Answer 7

Unpredictable, irregular variations in data that do not follow any patterns

Question 8

What are the three techniques used in quantitative sales forecasting?

Answer 8

• Moving averages
• Extrapolation
• Correlation

Question 9

What are moving averages?

Answer 9

Involves calculating averages from consecutive segments of data, helps smooth out fluctuations, making it easier to spot trends

Question 10

What is extrapolation?

Answer 10

Forecast future sales by extending patterns observed in past data

Question 11

What is correlation?

Answer 11

Occurs when two variables are related

Question 12

How can a four-quarter moving average help a business?

Answer 12

• Ensure they always have enough stock for customers
• Ensure they aren’t holding too much stock in the warehouse
• Ensure wastage isn’t increasing during certain periods of the year

Question 13

What does it mean in a business “adjusts for variation”?

Answer 13

Adjusting for variation in quantitative sales forecasting means removing or accounting for predictable fluctuations in sales data to get a clearer view of under-lying trends

Question 14

Why would a business want to adjust its sales forecasts for variation?

Answer 14

• Improve accuracy
• Identify trends: by smoothing out these variations, businesses can better see long term trends
• Plan effectively

Question 15

What is the formula for variation?

Answer 15

variation = actual sales - trend (moving average)

Question 16

Advantages of Quantitative Sales Forecasting

Answer 16

• Method accesses historical data, hence, giving minimal chances to bias and assists in making informed decisions
• Numerical data can expose patterns of consumer behaviour, spending trends, sales and scheduling
• When businesses have detailed concrete data to support their need for investors or loans, the quantitative technique certainly works in their favour

Question 17

Disadvantages of Quantitative Sales Forecasting

Answer 17

• Relies on past data
• Ignores qualitative factors
• Assumes patterns stay the same
• Too simple for complex influences
• Depends on data quality
• Can be time consuming