Making accurate Sales Forecasts in MikesBikes is crucial in ensuring that you are producing enough of your products to meet the demand of your consumers, and to ensure that you are not wasting money and factory resources in unnecessarily overproducing your products.
How to Forecast Sales Accurately
A Sales Forecast is a prediction of the number of units you believe you can sell in the year ahead. This is calculated by using the following equation:
Sales Forecast = Estimated Market Size Next Year x Expected Percentage of Market Share
You can find the figures required for the above calculation on the Sales Information report.
How to set Production Levels
Your Production decision should be based on your Sales Forecast for next year, minus Opening Inventory (if any).
Production = Sales Forecast – Opening Inventory
You have the option to produce more than your Sales Forecast to allow a buffer of extra stock if demand is greater than forecast. However, be warned that retaining closing inventory costs your company in holding fees. While producing too few bikes can result in Lost Sales where demand is greater than supply.
Tutorial Video: How to Accurately Forecast Sales
Have a look at our tutorial video which explains Sales Forecasting in further detail:
