Planning and Forecasting

 

Planning and Forecasting

 Forecasting sounds too simple, but a lot of challenges might face along the way. The driving forces that impact business forecasting success are clear outline objectives and focus on the process. The most critical step in the forecasting process is growth, reducing costs, maximizing customer retention. If the specific goals and objectives are not clear, it won't be easy to achieve the forecasted goals. Forecasting can help them deal with these troubles, but it can help them more, the more they know about the general principles of forecasting, what it can and cannot do for them currently, and which techniques are suited to their needs. The strategy and process for implementing rolling forecasts within an organization are to ensure consistency, and the process needs to be efficient, easy to implement. Forecasting in business creates opportunities to make critical business decisions based on estimated future trends. Business forecasting is a prediction or projection of future developments in the market, such as spending, potential revenue, sales, and determine how to allocate budgets and plan for upcoming expenses during a period. There are two types of forecasting short-term forecasting plan, which is essential in annual budget planning and for ensuring daily business operations achieve long-term goals. Long-term forecasts cover for three to five years align with business goals by reviewing the business plan, mission, and vision statements. Short-term business forecasts focus on sales, business operations, whereas a long-term focus on profit and growth (Lohrey,2020).

Forecasting business revenue and expenses during the startup stage are More critical, and accurate financial forecasts will help to develop operational and staffing plans. Forecasting business, which is the backbone of the business plan is not about guessing the future correctly rather than assumptions, expectations, tracking, and management. According to Calvello(2020).  Business forecasting can be used in many ways, but mostly  used as below:

Strategic planning and decision-making (long-term goals)

Finance and accounting (budget and cost controls)

Marketing (pricing of products and consumer behavior)

Operations and supply chain (inventory and production) (Calvello, 2020)

            According to Garrett(2013), "Every business starts with optimistic spreadsheet projections of profit and success. But more than half of these businesses will fail within the first four years of operation, and 72 percent say they went out of business because they ran out of cash. Prediction and erroneous perception in the real world are quite different from that of the mythical seer, and certain actions in the present influence the future (Garrett,2013)".  

Innovation is the development of an absolute value that meets a new need of a customer. According to Satell (2014), "Blockbuster one of the largest DVD rental is an example of the failure to innovate. The company, at its peak and was primed to lead the market with an innovative digital offering. Still, the forecast failed had the opportunity to purchase the fledgling company Netflix which was a new business offering a postal service. Blockbuster never envisioned the future for streaming and didn't buy Netflix in 2000. Blockbuster forecast and planning did not do proper scenario-type planning and only relied on standard forecasting and failed to sustain and went bankrupt in 2010. Blockbuster’s model failed as they earned an enormous amount of money by charging its customer's late fees, which had become an essential part of Blockbuster’s revenue model, and the company’s profits were highly dependent on penalizing its patrons. Netflix took the opportunity for subscriptions based model instead of charging to rent videos and annoying late fees unnecessary (Satell,2014).

The driving force of failures in forecasting is incorrectly budgeting for operations and loss of credibility. The poor sales forecasting and inventory planning can have a significant negative impact on the credibility of a business. The unable to meet demand will deliver an unsatisfactory customer experience, which in turn leads to further loss of sales down the line. The poor customer experience and disruption of the fulfillment process can experience an unexpected surge in sales.

Scenario planning has become a widely used method that enables an organization to function from a proactive place. Scenario planning is an excellent tool to use for planning during uncertain times, which is a disciplined and iterative process. According to Newman (2020), “The critical steps for scenario planning are Identify external and internal uncertainties and explore alternative future that impacts the mission. Identifying possible scenarios and courses of action are most viable in scenario planning. Scenario planning can help the social impact of change and help the social sector to reimagine unjust systems. The social sector has an opportunity to meet the moment and step forward with bold action using Scenario planning(Newman ,2020)”.

 

 

 

 

 

References

Calvello, M.(2020). Expect the Unexpected: Business Forecasting Makes It Easy. Retrieved from https://learn.g2.com/business-forecasting

Garrett, M. (2013). Traditional Forecasting Leads to Traditional Results...Failure. Retrieved from https://www.forbes.com/sites/matthewgarrett/2013/08/22/traditional-forecasting-leads-to-traditional-results-failure/#40f08597bebc

Newman, B.(2020). Scenario Planning: Rapid Planning in a Time of Rapid Change. Retrieved from https://blog.boardsource.org/blog/scenario-planning-rapid-planning-in-a-time-of-rapid-change

Lohrey, J.(2020). How to Do a Business Forecast. Retrieved from https://smallbusiness. chron.com/business-forecast-75708.html

Satell, G. (2014). A Look Back At Why Blockbuster Really Failed And Why It Didn't Have To. Retrieved from https://www.forbes.com/sites/gregsatell/2014/09/05/a-look-back-at-why-blockbuster-really-failed-and-why-it-didnt-have-to/#a4293981d64a