Expert's Panel

A collection of timely and important topics posed to our panel of experts.

How can we train our sales force and customers to provide better forecasts?

 (ep1029)
1. The answer is how do you incentivize them to make better forecasts. They should not get any incentive for sales that are not forecast. The sales manager then needs to track their forecasts, let them know they are being tracked, and make it clear that we are trying to get accuracy and why. Maybe there is a booby prize at the sales meeting for the worst forecaster.
2. We went the other direction. We gave large bonuses to the salespeople that had the most accurate forecasts.
3. The cost to the company for bad forecasts is very expensive. In the materials business we never allowed a top-down forecast, which is where everyone sits down around the table and decides the percentage increase next year. We did bottoms-up forecast, where every salesperson must take their top accounts for the last three years and forecast the future sales month-by-month. It is arduous but can be done in a day or two. Then, in the meeting, every salesperson has to defend every single number on the page. The sales manager looks for flaws and challenges them, asking the salesperson to explain it. That is the only way you are going to get a forecast that makes any sense.
4. The other part of the question is customers. The best example I can think of is ASML. They ask customers to put money down if they forecast orders they want filled, with penalties if they cancel.