How to Identify Trend Breaks in Sales Forecasting

HOW TO IDENTIFY TREND BREAKS IN SALES FORECASTING By Emillio J. Rodriguez Understanding of when, where and why sales trend breaks occur can improve forecasts … by plotting sales data over time one can get a fair amount of idea about trend breaks … two main causes of trend breaks are changes in an industry and economy. Although times series and other statistical techniques are quite popular for sales forecasting, they are not quite adequate for identifying trend breaks. A trend break can be a turning point or a big upward or downward jump in the data. For example, sales in one period shot up because of one large order from the Federal Government. But they are important. Forecasters should study them closely before arriving at a forecast. Most of the quantitative models can identify and account for seasonal effects, but they cannot do much for trend breaks. In this article, we will show how to go about in identifying trend breaks. APPROACH TO IDENTIFICATION While the cause of a trend break may be many it is generally the result of certain changes within a company, as well as in the economy. If it is company related, one can dig up the data and find an evidence to support it. But ...