Sales Forecasting software uses statistical forecasting methods to generate forecasting. We at MXI Software explain relevance of exponential smoothing for sales forecasting, budgeting and business modelling.
Exponential smoothing methods weight the historical data using exponentially decreasing weighting. The immeidiate prior period has the most weight and each period prior to it has relatively less weight. The decline in weight is expressed mathematically as an exponential function. The smoothing parameters determine the weights. To see the relevance of this in action we developed the mxi free forecasting offer. MXI 60 minute free forecast session:
Comparison Among Exponential Smoothing Methods
Single Exponential Smoothing: Identifies the percentage of weight given to the prior period and all other historical periods. It does not adjust for trend or for seasonal variance.
Double Exponential Smoothing: Finds trend then adjusts the forecast data to reflect this trend instead of generating a single parameter for all forecast periods.
Holt-Winters: Identifies both trend and seasonal variance, and adjusts the forecast data to reflect these factors. This method is tuned to both high and low outliers. A better choice for handling seasonality is Double Exponential Smoothing with the Data Filters parameter set to Seasonal Adjustment.
Advanced Parameters for Exponential Smoothing
These smoothing constants are used in the equations for exponential smoothing methods. Keep the default settings unless you have a strong background in time-series forecasting.
Alpha: Determines how responsive a forecast is to sudden jumps and drops. It is the percentage weight given to the prior period, and the remainder is distributed to the other historical periods. Alpha is used in all exponential smoothing methods.
The lower the value of alpha, the less responsive the forecast is to sudden change. A value of 0.5 is very responsive. A value of 1.0 gives 100% of the weight to the prior period, and gives the same results as a prior period calculation. A value of 0.0 eliminates the prior period from the analysis.
Beta: Determines how sensitive a forecast is to the trend. The smaller the value of beta, the less weight is given to the trend. The value of beta is usually small, because trend is a long-term effect. Beta is not used in Single Exponential Smoothing.
Gamma: Determines how sensitive a forecast is to seasonal factors. The smaller the value of gamma, the less weight is given to seasonal factors. Gamma is used only by the Holt-Winters method.
Trend Dampening: Determines how sensitive the forecast is to large trends in recent time periods. Dampening identifies how quickly the trend reverts to the mean. A higher value implies slower dampening while a lower value implies faster dampening. The smaller the value, the less effect the trend has on the forecast.
For each constant, you can specify a maximum value, a minimum value, and an interval. The interval is an incremental value between the maximum and minimum, which the forecasting engine uses to find the optimal value of the constant.
Contact MXI Software
New research shows 38% of organizations surveyed are practicingadvanced analytics today to drive sales forecasting using new sales forecasting software and business intelligence. Within 3 years 85% say they intend to. The current recession is teaching everyone to understand business, customer better.
Why such a dramatic change? The use of advanced analytics such as exponential smoothing, trending analysis, business intelligence is driving up organisations need to intepret constantly changing business environments (as seen in the ongoing recession and the resultant market turmoil), as well as to discover opportunities for cost reductions and new sales targets (which are key to surviving and thriving in a down economy). Its the logical extension of the lean manufacturing ethos. Read Fill the Gap between Excel & Business intelligence.
Organisations driving these using advanced analytics: query-based analytics (which relies on complex SQL statements to define recent business events) and predictive analytics using sales forecasting software (which uses data mining and statistical methods to anticipate future events). Much of this activity is currently being done in spreadsheets.
There are many applications of advanced analytics, but most of
them involve discovering relationships, reading trends, anticipating the future, and adapting to change. Working with the right data in the right condition is key to achieving these goals.
Discover relationships. Whether advanced analytics is data mining, statistics, artificial intelligence, or complex queries, you will discover and quantify important relationships that you may have been unaware of. These relationships can reveal fraud, define customer segments, group products of affinity, and link field conditions that lead to product failures. The newly
discovered relationships target marketing campaigns more accurately, develop effective merchandizing strategies, and improve product quality.
Sales forecasting software for example will anticipate the future. For example, predictive business models quantify a customer’s proclivity to churn, thereby giving you an opportunity to retain the customer. Predictive financial models can assist with various types of forecasting. Likewise, predictive analytics can quantify future risk for pragmatic applications in actuarial tables or loan approvals.
Understand and adapt to change. On the one hand, advanced analytics can help you understand change in the form of rising costs or new customer behaviours. On the other hand, the discoveries made through analytics can lead to positive changes that help your business adapt to an evolving world.
From a business standpoint, benefits are obvious however it needs specialised analytic tools and analytic databases from a technology standpoint. Organisations new to advanced analytics will need to reach beyong current IT landscape, reporting and data capabilities.
Contact MXI Software
The proper use of budgeting and forecasting software and business intelligence and financial modelling software has been seriously stymied by the availability of spreadsheets. Users have been not critical of this vital marketplace and as a result their use has been overdeveloped, so many decisions made with the assistance of spreadsheets.
This means the user doesn’t need a technical background to develop proficiency with the tool. Users are able to employ their finance skills and creativity to build models that answer straightforward business questions. Problem arise when these models form the backbone of financial planning and decision making. Spreadsheets expand in terms of the number of cells, formulas, and calculations which means an increase in complexity, rigidity, and risk. Even simple changes often require significant revisions and testing to make sure the logic still works. As models grow, they frequently expand into linked worksheets. All of this extra work involved.
Budgeting, forecasting and planning are key to any business as businesses need to be responsive to changes in customer demands, cash flows, and general business conditions. Business simple can’t stop and changes to spreadsheet models can take hours, days or even weeks as they aren’t able to easily adapt to change. When you compare Excel against Quantrix these similar changes in Quantrix models take only seconds or minutes, leading to substantial gains in productivity and responsiveness to business conditions.
When reviewing any budget, forecast or business plans most people prefer to make decisions with timely information. Remember that updating and budget or forecasting spreadsheets with the latest data tends to break the model, requiring significant time to discover, repair and test. Any changes to the underlying budget or forecast data structure or volume need to be closely monitored to determine the impact on the model. Many times a breakage will go undetected until a colleague, client, or auditor discovers your forecast numbers or planning results that don’t add up. With Quantrix, you simply use the DataLink™ “update” feature to pull in the latest forecast data. Quantrix has the flexibility to accommodate changes to your planning or budgeting data sources so that the model scales and adapts as the data source evolves. With Quantrix, getting the latest version of your budget, plan or forecast is just a matter of clicking a button.
View our Quantrix Video to see how Quantrix can out pass Excel as your Budgeting and Forecasting Software Application.
Contact MXI Software
In today’s environment, purchasing decisions are under increased scrutiny especially from the Finance Team. Financial Controllers and Finance Directors need solid numbers based persuasion. The investment return must obvious and the cashflows, cost, ROI, clearly demonstrated. Stands to reason.
Financial modelling and business intelligence from MXI Software can convert data into real business advantage using financial modelling software such Quantrix, Crystal Reports. Vendors need a compelling business case for CFO’s and purchasing committees. Model-based selling is the next level approach offering that opportunity, especially for high-value products and services that deliver long-lasting returns and benefits.
Model-based selling is not a new concept; however, it has never realized its potential due to technology and perception constraints. Sales executives have historically employed
spreadsheets to present figures and charts to prospective clients. However, the reliability of the model can be called into question by the closed nature of spreadsheets. Complex, linked worksheets with cryptic formulas are frequently perceived with suspicion due to the lack of transparency. Spreadsheet models can be percieved as being contrived to support the sales executives’ claims rather than present an objective business case. Sales executives will occasionally struggle explaining the inner workings of spreadsheet models to the prospect’s satisfaction. Quantrix offers a transparent, flexible tool that is ideally suited to model-based selling.
Key benefits of Quantrix include the ability to: A) Clearly present the business case using NPV, ROI, simple payback, net cash flows, tax benefits, and other calculations and metrics. B) Demonstrate the full range of configurations, customizations and other variables with “what if” scenarios. C) Present customized configurations in real time. D) Rapidly prototype solutions and respond to proposals. E) Build confidence and trust with highly transparent, understandable models. F) Create professional-looking, interactive dashboards and visualizations. G) Integrate multiple data sources to populate model with actual, timely data. H) Refine and improve model with data-driven analytics and feedback.
Vendor’s products and services are frequently evaluated according to Internal Rate of Return (IRR) or Return On Investment (ROI). If the acquisition does not meet a certain threshold or compare favorably to other investments, then the purchase does not move forward. Quantrix enables users to build models that incorporate key financial metrics including ROI, IRR, NPV, payback and others. Financial Controllers like to see where the numbers came from, it is much easier to demonstrate how the logic was constructed. The business logic and cell values used for these calculations are transparent and inscrutable, thus giving the sales executive the confidence to explain and stand behind the model.
Since Quantrix models are created with plain-language formulas, it is very easy for prospects to understand and validate the logic. Quantrix models often reduce the number of formulas by over 85%. Interested Take the Excel Challenge and let us show how Quantrix will work effectively for you. Excel Challenge
Contact MXI Software
In the Excel versus Business Intelligence battle, there is only one winner currently. It's not a fair battle by any means however the Business intelligence, financial modelling Industry lags miles behind in second place.
Vendors and enthuasists of business intelligence/ financial modelling, demand management software have long argued that user’s preference / attachment to spreadsheets is one of the biggest preventatives to real Business Intelligence. Users maintain that spreadsheets provide all the BI capability they need.
If Vendors and supporters BI software were honest with themselves they would agree that spreadsheets are not only a data source for BI applications, but often the preferred front-end access to BI application or ERP solution data.
Making things more interesting is PowerPivot in the latest edition of Excel 2010 with a lot of BI functionality. This raises the question of whether this will mean even fewer people will see a need for dedicated BI software or help drive interest in it.
The financial Modelling and business intelligence software which we sell and implement is much more proficient, cost effective and powerful. And we are willing to be put our believes to the test against the darkness hegemony (a well known company from Seatlle, not Boeing). Thats why at MXI we offer the Excel Challenge.
Whatever happens, the tension between spreadsheet users and BI supporters will increase over the next few months as more IT organizations become familiar with Excel 2010. But in the end, it’s more likely that PowerPivot will become an integral component of just about any total BI solution.
In UK / Ireland MXI implement and develop business intelligence solutions based around SQL Server, Quantrix, Forecast PRO and Excel. Free Forecast PRO Trial
Contact MXI Software
Within many companies, there are ften two distinct camps of business analyst, defined as anyone who organises data and creates meaningful information and analyses as part of their job. In one camp, you have spreadsheet users. These are usually professionals in finance, sales, human resources, operations, etc. They are likely to have a business
background and varying degrees of technical acumen. They favor spreadsheets because
they can create business models such as forecasts, budgets, strategic plans, compensation and other models that provide answers to a variety of straightforward, day-to-day issues. Some of these spreadsheet users have developed advanced skills for
building pivot tables, linked worksheets, and macros.
In the other camp, there are the business intelligence (BI) people, financial modelling skills. They are typically professionals with degrees in computer science, database administration or some other technical specialisation.
They’ve embraced BI tools due to their superior reporting, analytics, performance, integration and scalability. They develop complex multi-dimensional OLAP analyses whose capabilities can be extended and customised with programming. They create
detailed reports and dashboards by aggregating, organising and presenting historic company data. As these two camps come from differing perspectives, have differing objectives, and use different business tools, they effectively “speak different languages”
which results in a significant gap that hinders the full potential of business analytics within the organisation. For these people we recommend a free trial of the Business Intelligence financial modelling tool QUANTRIX. Free Trial QUANTRIX
Filling the Gap
Businesses need a tool that brings the two analyst camps together by filling the gap between spreadsheets and BI tools – one that affords the approachability of spreadsheets with the robust analysis and reporting capabilities of BI applications. In
his article “The Changing Face of Business Intelligence”, David Wells discusses the gap between IT-centric BI applications and office-oriented spreadsheets. As he states, “The goal of next generation analytics is not to choose – certainly not to eliminate one approach in favor of the other. Instead, it is to fill in the middle, moving from two extremes to a continium of analytic options.” He further contends that BI needs to be focused more on the business analyst.
"The business analyst" says Wells "is not someone with a business analyst title, but more likely a manager who simply has to perform analysis as part of day-to-day work. This new generation of analysts has high expectations. They want their analytics fast, they want easy connections to trustworthy data, and they want to keep the data in sight. But most of all they want forward-looking analytics. The retrospective stuff of the past doesn't meet their needs. They want to answer 'what if' questions with modeling and simulation." Thats why we recommend a
Watch Video now click here QUANTRIX
Contact MXI Software
It’s a big move from MXI Software in UK/Ireland releasing the EFACS Manufacturing software for manufacturing and distribution marketplaces under the ORACLE. EFACS software has long sported its independence from the Microsoft hegemony of .Net and Windows Server, SQL.
Prospective EFACS users now have a real choice between ORACLE and SQL Server databases.
ORACLE actively contends that its scaleability, speed, security is far better suited to real industrial use than SQL Server. EFACS which suits mid range manufacturing and distribution users now have the chance to discover the reality behind this contention themselves.
Also featured in the release Maintenance Release No.27 of the Version 8.5 series of EFACS ERP software are Non-conformance System, Multi-Item Stock Receipt, Enhanced Manage Supplier Returns, Contract Control Enhancements, Eagle/EFACS integration.
Tadhg Henderson, ERP Project Manager for MXI Software comments “It is seed change in the EFACS capability marking a real change and a move away from pure Windows. It offers clients and new users a real choice, ask us for a price and you will get a real surprise as both purchasing and ownership costs have really come down.
Contact MXI Software
Financial Modelling has always been central to any analysis for evaluating a business health or justify further investment in its growth.
There are several important steps to follow in developing a financial model which will serve your objectives as a corporate manager or entrepreneur, whether you’re trying to manage what you have or raise capital for what you could do. This is particularly true for newer enterprises, as the discipline associated with identifying and thinking through the key business drivers is invaluable to the early planning process.
Figure out what you’re trying to accomplish.
As an entrepreneur or executive, you have a number of competing objectives. Depending on how established you are, you may have a business to run on a day-to-day basis, and it’s hard to find the time to plan, build and manage against a set of financial models.
You may be tempted to build a simple profit and loss type spreadsheet laying out revenue assumptions and costs. But effective financial models can and should be used for so much more. Using them, you can look six to sixty months down the road to plan for organic growth, evaluate opportunities to enter new markets or take on new sources of capital, or anticipate liquidity problems. It is highly recommended to take the time to build a model which will generate a consolidated set of financial statements, cash flows, balance sheets that will provide a more comprehensive picture of your business. And the sooner you identify the range of scenarios, the easier it is to plan and build your model to accommodate them.
Fail to Plan: Plan to Fail.
Real business intelligence emerges in the planning phase of any project evaluating new opportunities, testing best worst scenario’s. Examining and determining the key business drivers and assumptions. Financial modelling software is needed to test the more complex opportunities. A good guideline is a spreadsheet with more than a 100 lines of depth and 4 connected worksheets is too much for Excel.
A great way to start forecasting correctly by taking advantage of Free Trials. And for those that need more help, MXI are willing to give you a month’s trial and build your first business model. See about MXI’s Free forecast Offer
Contact MXI Software
Forecast PRO sales forecasting software will dramatically improve your sales forecasting accuracy, track historical forecasts and produce variance reports for better business intelligence that will drive improvement in your enterprise forecasting process.
Four reasons to track forecast accuracy
1. Improving your forecasting process requires the ability to track accuracy.
Sales Forecasting should be viewed as a continuous improvement process. Your forecasting team should be constantly striving to improve the forecasting process and forecast accuracy.
For example, many organizations generate baseline forecasts using statistical approaches and then make adjustments personally based on local knowledge such as an upcoming promotion. Organisations that track the accuracy of both the statistical and adjusted forecasts learn where the adjustments improve the forecasts and where they make them worse. This knowledge allows them to focus their time and attention on the items where the adjustments are adding value.
2. Tracking accuracy provides insight into expected performance.
A forecast is more than a number. To use a forecast effectively you need an understanding of the expected accuracy.
Within-sample statistics and confidence limits provide some insight into expected accuracy; however, they almost always underestimate the actual (out-of-sample) forecasting error. This is due to the fact that the parameters of a statistical model are selected to minimize the fitted error over the historic data. The parameters are thus adapted to the historic data, and reflect any of its peculiarities. Put another way, the model is optimized for the past—not for the future.
As part of our drive to help companies improve forecasting, we are offering a free forecast: Just sent your data in to us
3. Tracking accuracy allows you to benchmark your forecasts.
If you are lucky enough to be in an industry with published statistics on forecast accuracy, comparing your accuracy to these benchmarks provides insight into your forecasting effectiveness. If industry benchmarks are not available (usually the case), periodically benchmarking your current forecast accuracy against your earlier forecast accuracy allows you to measure your improvement.
4. Monitoring forecast accuracy allows you to spot problems early.
An abrupt unexpected change in forecast accuracy is often the result of some underlying event. For example, if unbeknownst to you, a key customer decides to carry a competing product, your first indication might be an unusually large forecast error. Routinely monitoring forecast errors allows you to spot, investigate and respond to these changes early on—before they turn into bigger problems.
Contact MXI Software
It isn't easy but it can be done. Demand Management, Supply Forecasters, Sales and Operations planning collectively can achieve this. Sales Team define the sales plans, timings and volumes of the demand from customers. We explain how Sales, Marketing and Management need to combine to drive accuracy improvement.
Once a month they need to communicate anticipated purchased customers will make including volume, timing and the degree of certainty over the agreed planning horizon. Free forecast :: Send us your data and we will send you a forecast
Explain the assumptions on which plans are based. Detail the market intelligence and customer feedback outlining problems and opportunities similarly. Sales Team need to immediately advise of issues which will impact changes in demand as soon as they become known. Not a classic trait of any sales team.
Sales and Operation Planning and Demand Management is also heavily influenced by the sales forecasts provided by Marketing. Marketing need to detail plans for impacting demand. Monthly updates on the efforts of the marketing team to drive and control demand management. Promotions, Price cuts or increase, Retailer or customer incentives need to advised and communicated to Sales.
Marekting needs to update tracking, measuring and reporting competitor activity, external factors which impact sales levels on a monthly basis. In the face of the field report from Sales, Marketing needs to tweak the sales and marketing strategy.
Product and Brand Managers - Need to outline supports available, product launches, new product development, and list product to be discontinued and not be shy about sharing these details. Furnish Sales and Marketing with budgets, define the product strategies, making clear to the Demand Managers, Supply Chain Managers, Forecasters company plans and objectives.
Management need to convey the Assumptions behind product life cycles. Brand Owners, Product Managers needs to detail delays in product launches changes in product plans which impact demand.
Contact MXI Software
Watching a Football match without the live-score in the corn
er on the TV is a pain. Manufacturers need the same clarity as well. Manufacturing Software can help improve Stock Turnover, Demand Management, Forecast Accuracy, On time delivery, Production times, Margin control, Quality Control levels.
The objectives are usually easily defined, lower stock, more sales throughput, less administration, better productive use of the plant. A simple stock control improvement to drive your lean manufacturing and quality control change programme.
TIP - CYCLE Count stock regularly
MXI manufacturing software customer SMART Electronics use daily stock counting known as “cycle counting” to reduce costs, improve quality control everyday. This process means invoices are correct, all parts are accounted, very low stock outs, deliveries are in time, better pricing from suppliers, high customer levels of satisfaction. SMART Electronics know they win extra business as their customers can rely on them even winning orders from China.
Cycle counting is a Stock count by another name. Randomly select parts every day, check the parts and adjust your Stock Control system until it is correct. Within 3 months your shop floor will look totally different.
Maybe a lot of work but worth it. No tedious all night counts with Auditors, looking all over the plant to find one item that may have been already used or shipped. No extra cost just using an existing feature in your system.
Is it in stock? When will it be ready? Can you quote it today? At a time when service is vital, simple things done well matter.
There are lots of features in MXI manufacturing software Alliance MFG and EFACS ERP Software when simply using a new features or switching it on will help drive change for good in your manufacturing concern every-day. Quality, E-business, Stock Control, Forecasting accuracy
Easy as 1,2,3.
Simplified Better Stock Control
Cheaper Faster Production
Reduce Production Times & Increase Output
Increase Sales
Smaller concerns can achieve a lot in 13 - 18 weeks, Larger Companies need much longer.
Agree on your objectives early with the principles in your business.
Choose an easy subject matters for early wins (i.e. Sales Orders, Stock Control, Purchasing)
The bigger the concern give yourselves more time and more modest goals
Further short articles will appear in months to come on how to and the benefits of implementing manufacturing software.
Register now for a free stock control audit!
Contact MXI Software