The Impact of Sales Forecasting Management on Business Performance

Abstract

Sales are the backbone for a company, sales forecasting plays an important role in organizational decision-making, and improving the sales forecasting performance has been an intention for managers. Sales forecasting is a management function that is affected by various organizational factors. The aim of this research is to validate a Sales Forecasting Management (SFM) framework to improve the sales forecasting performance in a high-tech industry and study the impact of forecasting on the organization’s business performance. The organizational factors such as sales compensation structure, product life-cycle stage of the company, information logistics, and cross-functional communication of the SFM framework are validated in the context of the high-tech industry. Further, the framework is quantified by developing an appropriate sales forecasting model. Both quantitative and qualitative forecasting methods are studied and the most appropriate technique with high accuracy is chosen. Finally, the effect of sales forecasting performance on a specific business outcome – End of Service Benefits (EOSB) is quantitatively measured. The EOSB is the gratuity payment received by the employees of the company when they are terminated or resigning from the job. It is a crucial operational expenditure that is proportional to the salaries earned by the sales employees and the accuracy in EOSB forecasts has an impact on the company’s stock price and investment decisions. The results of the research show that the accuracy in sales forecasts has a significant impact on the End of Service Benefits forecast. The research also finds that the SFM framework has to be adjusted to include the sales pipeline stages as an important organizational factor that influences sales forecasting management. Thus, the thesis provides an interesting insight to include the sales pipeline stages in the framework to improve the sales forecasting credibility. Finally, the SFM framework is evaluated, the impact of sales forecasting performance on a business outcome (EOSB) is quantitatively measured using a sales forecasting simulation model and the conclusions are derived.