Before proceeding further, it is necessary to define certain terms widely in use but not having the same meaning for everyone. In practice, terms like "potential", "market", "demand", "sales" and "target", are used interchangeably as if they mean the same thing. For the purpose of this manual, we shall assign these terms meanings to ensure that they are not misunderstood.
The term "potential" refers to the quantity of fertilizer a country or region of a country can consume under optimum conditions. The entire cultivated area under various crops multiplied by the recommended fertilizer dosage for each crop can be said to represent the potential fertilizer consumption for a country.
It is obvious that interest in fertilizer or the opportunity to use it is not adequate by itself. Farmers must have the conviction that by using fertilizer they can increase their income. Even if that is the case they will not necessarily buy fertilizer. This depends on the amount of money they have when they need the fertilizer and/or the availability of credit. Farmers require the fertilizer they need to be available on a timely basis. "Access" refers to the ability of the distribution network to make the right type of fertilizer available to the farmer in time and as conveniently as possible. Depending on these factors, there is an available "market" or "demand". Forecast demand is the quantity of fertilizer likely to be sold over some definite period for an entire country or part of a country. The terms "market" and "demand" are used interchangeably. While "market" or "demand" refer to the sales of all companies in the country, the term "sales" refers to one company. The fertilizer sales of a company depends on its market share.
The terms "sales quota" and "sales target" are not to be confused with sales forecast. "Quota" and "target" are interchangeable in use and refer to the disaggregation of the sales forecast into smaller parts applicable to each geographical area for each week, month or quarter. The purpose of setting sales quotas/targets in advance is to ensure that the company's actual sales during the period are commensurate with the forecast which, we have seen earlier, represents its due market share. The sum of the sales quotas/targets need not necessarily be equal to the sales forecast. To stretch sales efforts fully, targets/quotas are sometimes set at a higher level than the forecast. Quotas should be challenging but realistic.
Sales targets/quotas for sales territories
Failure to appreciate the distinction between "potential" and "demand" can prove disastrous. Importation based on potential, equating it with likely effective demand, leads to inventory accumulation, heavy losses by way of interest and storage charges, multiple handling, spoilage, rebagging and, above all, waste of scarce foreign exchange. The gap between potential and the likely effective demand can suggest policies and development plans to achieve agricultural production goals. Assessment of potential is not essential for fertilizer marketing organisations whereas it is an essential prerequisite for government planning, as long as governments are fully aware of the need not to confuse potential with demand.
Short and long-term forecasts serve different purposes. Short-term forecasts are concerned with the next season or year. Short-term projections are needed to arrange production, procurement of finished/raw/packing materials, storage, transport and working capital so that the expected demand is met successfully. Long-term projections over four to five years are used for policy and investment decisions. Investment in new production and research facilities, formulation of development plans, strengthening credit institution, etc. are examples of decisions governed by long-term forecasts.
