This technique attempts to predict sales levels by identifying the underlying trend from a sequence of actual sales figures recorded at regular intervals.
Includes three variables:
- Seasonal Variations: fluctuations throughout the year.
- Cyclical Variations: fluctuations in economic patterns.
- Random variations: unpredictable fluctuations.
Example: 3 Point moving average:
Example: 4 Point moving average:
Advantages
- Improved working captial and cash flow.
- Improved stock control.
- Improved productive efficiency.
- Helps to secure external sources of finance.
- Improved budgeting.
Disadvantages
- Limited information.
- Inaccuracy of predictions.
- Garbage in, garbage out.
- External influences (unpredictability).
