engleski

System dynamics approach to measuring influence of sales forecasts on the business performance

Number of decisions on investment, operations, and financing of the firm are based on sales forecasts. However, in selection of forecasting method it is not enough to take into account accuracy of the forecast. It is more important to estimate the influence of forecasting method on the success of the firm. Experiments for measurement of influence of the sales forecasts on the business performance in different consequences should be conducted in order to evaluate efficiency of the forecasting methods. Procedure for conducting such experiments based on system dynamics approach has been proposed. System dynamics approach is based on modeling and simulation of dynamic systems with feedback. Simulation model of the firm has been designed. Financial and real flows that are results of decisions on investment, operations, and financing are main parts of the simulation model. Influence of sales forecasts on the success of the firm has been analyzed. In the example of the experiments, sales forecasts are generated by the two methods (simple exponential smoothing and status quo method), which efficiency are evaluated in different circumstances (step increase, linear growth, and random oscillations of the sales). It has been illustrated that different methods are appropriate in different circumstances. Accuracy of the forecasting method is not a guarantee of the successful business performance. System dynamics approach could be useful in conducting experiments which purpose is to analyze influence of sales forecasts on the business performance. Simulation model of the firm should be designed according to specific characteristics of the particular firm, and could be used for analysis of any number of forecasting methods in different circumstances.

system dynamics; sales forecasting; financial planning; management education

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