Analyse one benefit and one limitation of sales forecasting to LBM as it begins its mining operations.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2025). The mark or mark type is shown in brackets.

1. [1] Sales forecasting involves making a prediction of future sales volumes or revenues.
2. [1] Time series analysis is a method of forecasting based on extrapolation from past data.
3. [1] Contribution to workforce planning.
4. [1] Planning purchase of resources.
5. [1] Greater accuracy in cash flow forecasting.
6. [1] Aids operational decisions.
7. [1] Aids decisions about pricing.
8. [1] Identifies both trend and seasonal variation.
9. [1] Lack of historical data to use quantitative technique
10. [1] Uncertainty regarding external influences
11. [1] LBM is just beginning its mining operations.
12. [1] Output is difficult to vary at very short notice.
13. [1] Holding inventory of lithium involves high costs.
14. [1] Variations in demand for electric vehicles and smartphones exist.
15. [1] Alternatives to lithium are being developed.
16. [1] New hard rock mining under development.
17. [1] Global demand for lithium is rising and supply will not meet demand after 2030.
18. [1] Accurate sales forecasts are crucial because output from lithium mines is difficult to vary at short notice thus allowing LBM to plan production capacity in advance to ensure sufficient lithium is available to meet forecast rapidly rising demand.
19. [1] Sales forecasts important in planning resource needs and therefore keeping costs low which will increase efficiency and therefore profit.
20. [1] Accuracy and reliability depend on market conditions remaining the same - this is possibly not likely in the lithium market due to variations in demand for products containing batteries resulting in failure to capitalise on market growth.
21. [1] Accuracy and reliability are higher in the near future so longer term forecasts are less reliable reducing the usefulness of forecasting to planning.
22. [1] SF relies on historical data/trends but the future of lithium demand is uncertain due to variations in demand for electric vehicles and smartphones and the development of alternatives; this lack of reliability means LBM may miscalculate production, leading to high inventory holding cost.