In MikesBikes Advanced you will be required to formulate a Sales Forecast for your products, as well as a required production quantity.
A Sales Forecast is a prediction of the number of units you believe you can sell in the year ahead. Making accurate Sales Forecasts is crucial to ensure you produce enough bikes to meet customer demand, while not producing too much leaving you with excess stock on hand.
How to Forecast Sales Accurately
A Sales Forecast in MikesBikes is calculated using the following equation:
Sales Forecast = Estimated Market Size Next Year x Expected Percentage of Market Share
You can find the figures required for the above calculation on the Sales Information report at the right of your product decision screen:
These figures are located on the Sales Information report here:
So for the example above:
34,000 x 50% = 17,000 units.
How to set Production Levels
Your Production decision should be your Sales Forecast minus Opening Inventory (if any):
Production = Sales Forecast – Opening Inventory
Note: You may want to consider producing 5-10% more than your Sales Forecast to allow a buffer of extra stock if demand is greater than forecast. However, keep in mind that retaining extra inventory comes at a costs.
How to Forecast Sales for a New Market Segment
In Year two you are given the opportunity to add a new product into any of the new market segments. The challenge in forecasting sales is there is no existing sales data. So how do you conduct a Sales Forecast in a New Market?
You should still use the Sales Information or Market Research report to identify the forecast market demand for your target market. Then divide this by the number of products you estimate will be in the market for the year ahead. For example, if there were six competitors in your industry, it would be reasonable to expect at least two others will also launch a product into the new market.