What is Sales Forecasting?What is Sales Forecasting?
“Prediction based on past sales performance and an analysis of
expected market conditions.”
• The true value in making a forecast is that it forces us to
look at the future objectively.
Importance of Sales ForecastingImportance of Sales Forecasting
Evaluation of past and current sales levels and
Compare your company to industry benchmarks
Establish policies to monitor prices and operating
Make a company aware of minor problems before
they become major problems
Importance of Sales ForecastingImportance of Sales Forecasting
Companies that implement accurate sales forecasting processes
realize important benefits such as:
• Optimised cash flow
• Knowing when and how much to buy
• In-depth knowledge of customers and the products they order
• The ability to plan for production and capacity
• The ability to identify the pattern or trend of sales
• Determine the value of a business above the value of its
• Ability to determine the expected return on investment
Internal factors affecting SalesInternal factors affecting Sales
External factors affecting SalesExternal factors affecting Sales
Every company needs to generate forecasts of their short to
medium term sales. Being able to forecast demand more
accurately has major commercial advantages, whether the
forecast is used:
To plan purchasing, production and inventory
As the basis of marketing or sales planning
Or for financial planning and reporting or budgeting
Types of forecastingTypes of forecasting
Time-Series Forecasting A common forecasting
task is to predict sales for the next 12 months based
on sales of the past 36 months.
Time-series techniques are quantitative-that is, they
use values recorded at regular time intervals (sales
history) to predicts future values
Correlation or Regression TechniquesCorrelation or Regression Techniques
Another common forecasting task is to predict the
increase in sales given some marketing action such
as a sales promotion or advertising campaign. In
this case, correlation or regression techniques are
used to compare how a change in one variable (e.g.
advertising effort) causes a change in another
variable (e.g. sales volume).
Qualitative TechniquesQualitative Techniques
Changes in sales volume may result from the actions
of the company or from other factors such as actions
by competitors and economic conditions.
Time-series techniques cannot foresee and regression
techniques cannot account for changes in demand
patterns and other relationships that affect sales
volume. Instead qualitative techniques (also called
subjective and judgmental techniques) call on the
expertise of people inside and outside the company to
adjust the forecast to account for these factors.
The three categories include many different sales
Indian paint industryIndian paint industry
The paint market in the country is estimated at around Rs
Around 35% of this market is with the unorganized players
Asian Paints is the largest player in controlling around 30%
of the overall paint market.
Asian Paints is India's largest paint company and the
operates in 21 countries and has 29 paint manufacturing
facilities in the world servicing consumers in over 65
Besides Asian Paints, the group operates around the world
through its subsidiaries Berger International Limited, Apco
Coatings, SCIB Paints and Taubmans
The demand for paints is relatively price-elastic but is linked
to the industrial and economical growth.
In most developed countries, the ratio of decorative
paints vis-ã -vis industrial paints is around 50:50.
All the industry majors have a vast dealership
network and are required to maintain high
Most of the paint leaders have technical tie-ups
with global paint leaders.
In India the organised sector controls 70 percent of
the total market with the remaining 30 percent
being in the hands of nearly 2000 small-scale units
In India the industrial paint segment accounts for
30 percent of the paint market while the decorative
paint segment accounts for 70 per cent of paints
sold in India
A few definitions…A few definitions…
Enamel – Paints for metals & also wood
Distempers – Economy interior wall paint
Interior Emulsion – Acrylic interior wall paint
Exterior Emulsion – Acrylic exterior wall paint
Wood Fin – Premium wood coating with natural
Undercoats – primers for adhesion, Putty for
Ancillaries – other paint requirements eg stainer,
Asian Paints Category PortfolioAsian Paints Category Portfolio
Category ProfileCategory Profile
APL is identified with the common man right from
the time the little boy Gattu was made famous by
Even now Enamels & distempers contribute upto
Emulsions a recent addition adding another 20%
YOY overall growthYOY overall growth
Value in Rs. Crs.
APL growth – YOY in double digits for the past 5
Growth % higher than competitors in the last 3
Changing consumer tastes led to new products &
focus on premium products.
Seasonality – ’07-08Seasonality – ’07-08
Seasonality ‘08-09Seasonality ‘08-09
Painting has been a seasonal activity across
Main seasons -, pre Diwali, Durga Pooja, Pongal,
Ramzan, Ganesh Chaturthi,etc.
70 – 75 % business done during this period.
Trends changing , especially urban & metros
Bombay figures show not a vast difference in sales
during this period.
Year on Year sales (category)Year on Year sales (category)
2003 - 04 2004 - 05 2005 - 06 2006 - 07 2007 - 08 2008 - 09
Ancillaries Enamel Ext Emulsions Ext Undercoat
Int Undercoats Int Wall Fin Wud Fin
Distempers (Tractor brand ), Enamels (Apcolite &
Gattu), Premium Emulsion, Cash cows for the Co.
Royale & Faux finishes (Play), Melamyne are Stars
Emulsions & Wood finish growing continuously at
15% higher than company growth.
Hence focus clearly on Emulsions.
Forecasting - ProcessForecasting - Process
Annual Retail audit conducted at dealer & Territory
All products accounted for.
Audit gives the dealers actual potential &
Competitor turnover is also recorded.
A town level profiling is done to identify town
Parameters for profiling – development activities,
construction, consumer profile, market share, etc.
Profiling helps identify actual potential of town &
dealers located in it.
Post profiling estimate turnover for the next year
Forecasting at decision levelForecasting at decision level
Regional level forecasting involving the Depot
managers, RM & DM.
GM Involved in discussions.
Co level focus products identified
Discussions based on regional level CAGR for past
This data gives the trend of sales at a product
Product growths analyzed
Competitor performance analyzed in these focus
Market trends, changing consumer trends analyzed
Plans for the year chalked out on the analysis of
these diverse data.
Budgets for the Region – Depot based on these
Production forwarded these forecasts for demand
Forecasting - ManufacturingForecasting - Manufacturing
Forecasting activity carried out also by production
“ i3” software – highly sophisticated, simplifying the
5 yrs data considered & a forecast created by the
Also movement of SKU’s at depots, regions
considered in this activity
Deliberations between production & sales
Trends may give a different forecast against plans
forwarded by sales
A midpoint reached & production planning for the
year is loaded onto the system.
Sales has an option of minor modifications in
production for each month.
This activity reduces the chances of dead stock.
Planning the forecast deliveryPlanning the forecast delivery
Once the forecasts are finalised,
Activities are planned to deliver the figures.
Eg: for 2009/10- 1st
half of the year will be slow.
This period will focus at influencer & consumer
Shop meets for low end painters
Contractor meets & training programmes for
In-shop selling activities (all show casing &
educating on new & focus products use &
Budgets at Depot & Territory levelBudgets at Depot & Territory level
Post forecasting & Budgets @ regional & depot level
– Territory level budgets finalised.
For finalisation of budgets the potential of dealers
& towns profiled is considered.