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BY
ANKIT GHOSH
M/BFT/10/05
Under the guidance of
Mr. Ranjan Kumar Saha
Department of fashion technology
NIFT, Mumbai
ACKNOWLEDGEMENT:
First and foremost I would like to thanks Pantaloons Fashion Retail Limited which gave me an
opportunity to work with their organization.
Further, I would like to thank my college mentor Mr. Ranjan Kumar Saha and my company
mentor Mr Amitesh Soni who guided me throughout my project.
I would also like to thank Mr Joshua Abraham Consultant A.T.Kearney, Mr Anand Kumaran
MIS Support Team and Mr Sourabh Tiwari IT Head to whom I was associated during my
Graduation Project.
I also express my gratitude towards Mr Amir Chavar, Ms Garima Dubey, Mr Neeraj Jagga, and
Ms Nisha Varma members of the Planning Team who helped me a lot during my project.
ABSTRACT:
BACKGROUND:
With a larger uncertainty and a more rapid change in todays business environment, a heavier
role to play lies within predicting future sales, also known as sales forecasting. Although
prediction becomes more important in order to not lose market shares, not all companies
regard the sales forecasting process as a key function within their organization.
RESEARCH ISSUE AND OBJECTIVE:
Sales forecasting is a common practice in retail industry but little is known about what methods
and techniques are used and what the attitude towards the sales forecasting management are.
Since sales forecasting works as an important information input to organizational planning, I
will empirically analyze and explore the attitudes towards sales forecasting techniques.
METHOD:
In order to explore and analyze the attitudes towards the sales forecasting process with
Pantaloons, various forecasting techniques are used in order to build logic for the MIS which
would give the maximum accuracy in sales forecasting.
FINDINGS AND CONCLUSIONS:
Usually sales forecasting is done either on the intuition of the buyers along with the planning
team by considering the current trend in the market or by considering the sales data for the
past few years in order to know a particular trend in the sales values across the years, but these
practices do not give an accurate sales forecast because today fashion keeps on changing every
moment. A best selling merchandise of the last year may not be the best seller this year if the
product life cycle fades. Hence forecasting for a particular season should be done on the basis
of the sales trends for the first few weeks for that particular season. But the limitation is that
for the first few weeks of that season the forecasting is on the basis of the past years data.
TABLE OF CONTENTS:
1)
INTRODUCTION .5
1.1)
PRIMARY OBJECTIVE . 6
1.2)
SECONDARY OBJECTIVE ..6
1.3)
NEED OF THE PROJECT .6
1.4)
A COMPREHENSIVE OVERVIEW OF SALES PLANNING.6
1.5)
FASHION SELLING PERIOD .7
1.6)
RETAIL PLANNING PROCESS .7
1.7)
MERCHANDISE PLANNING 7
1.8)
MERCHANDISE MANAGEMENT AND SALES FORECAST 8
1.9)
MERCHANDISE PLAN .9
1.10) PURPOSE OF A MERCHANDISE PLAN 9
1.11) PLANNING STOCK AND INVENTORY CONTROL 10
2)
LITERATURE REVIEW 11
2.1)
FORECASTING TECHNIQUE 12
2.2)
FORECASTING AS PART OF MANAGEMENT PROCESS .13
2.3)
PURPOSE OF FORECASTING ..14
2.4)
APPROACHES AND METHOD OF FORECASTING ..14
2.5)
ACCURACY IN FORECASTING 16
2.6)
INFORMATION SEARCH IN MERCHANDISE PLANNING 16
3)
4)
4.4)
4.5)
4.6)
4.7)
4.8)
4.9)
4.10)
4.11)
4.12)
4.13)
4.14)
4.15)
4.16)
4.17)
4.18)
4.19)
4.20)
4.21)
4.22)
4.24)
4.25)
4.26)
5)
RESULTS .69
5.1)
RESULT FROM THE PHASE I OF MIS AUTOMATION 70
5.2)
MENs CATEGORY ..70
5.3)
Non Apps CATEGORY ..70
5.4)
KIDS CATEGORY ..71
5.5)
WOMEN WESTERN CATEGORY .72
5.6)
WOMEN ETHNIC CATEGORY ..73
6) CONCLUSION .74
6.1)
MIS AUTOMIZATION FOR SALES FORECAST CONCLUSION 75
7) REFRENCES .76
7.1)
BOOKS 77
7.2)
ARTICLES AND JOURNALS .77
7.3)
WEBSITES .77
Graduation Project | BFT NIFT MUMBAI 2010-2014
CHAPTER I
INTRODUCTION
1) INTRODUCTION
1.1) PRIMARY OBJECTIVE:
The primary objective of my project is to provide logics for the atomization of current sales
report, the budget planning through sales forecasting using the best mathematical model in
order to reduce the forecast errors as well as the stock analysis for the upcoming weeks in
order to meet the customer demand.
1.2) SECONDARY OBJECTIVE:
To find out the forecast errors in case of the initial budget planning as well as the
forecast logics which are built for the MIS Automation and see how much percentage
fluctuations are there in both the budget plan.
Creating a manual report in the same format as that of the Automated Report for both
the weekly sales report as well as the sales forecasting report and validating it with the
MIS reports to find for the errors and accordingly correcting it to make the MIS system
stabilize.
1.3) NEED OF THE PROJECT:
As the world continues to develop into a more complex environment, higher demand has
grown for trendy products with a following shorter life cycle. Today there is a concept called as
fast fashion which means that todays fashion garments are so cheap to produce that they are
almost seen to be disposable.
To be able to foresee trends, seasonality and what customers truly demand, increases the odds
for a business to show good financial results. One way of decreasing the role of chance, in
dealing with this environment, is to use an accurate sales forecast. A forecast can be seen as
scientific best guess for a companys future demand.
The argument for this is, with an accurate forecast of future sales a large benefit in especially
the purchasing, the production and logistic planning can be gained.
The whole system of sales forecasting is being automated for which various logics are required
in order to get the best results.
1.4)
Realistic assortment planning for a particular market or product has become a difficult task in
todays consumer environment. Market competition has increased, consumers want more
product variety, and consumer needs from a product have become complex and various.
Assortments planning for fashion merchandise are more complex as compared to basic
merchandise and require sophisticated analysis of fashion and color trends. Hence to reduce
Graduation Project | BFT NIFT MUMBAI 2010-2014
the uncertainty of merchandising decisions, retail planners search for information from various
sources:
Past Sales History
Their own experience
Competitors sales situation
Retail Planners most difficult job to meet the consumer demand is the determination of the
Stock Keeping Unit (SKU). The classification of SKU is related to design evaluation, color demand
forecast and size determination evaluation.
In order to loose certain losses, which may be due to uncertain demand prediction, the Retail
Planning Team has begun to implement the Management Information System (MIS) for the
information search and forecast. The information search and forecast demand are usually done
six months before the selling point.
If an overview of the MIS is done it is seen that is it helpful in the assortment planning but a
reliable systematic approach and a reliable conceptual model is rarely found in it.
1.5)
The buying as well as the selling cycle of merchandise depends upon the fashion cycle of
consumer acceptance. However, predicting the right product cycle of an item is difficult, e.g.;
the bestselling item of the last year may be the worse selling item of the current year if the
product has a bad life cycle. Retail Planners in co-ordination with the Buyers depends on
intuition with the prediction of demand for a fashion-sensitive product. The nature of fashion
has a qualitative aspect in itself and hence the planning for an assortment has to be done
keeping in mind the qualitative as well as the quantitative analysis methods, which would in
turn result in accuracy in forecasting and reduce sales loss.
1.6)
When buyers are purchasing merchandise it is necessary for them to control the purchase,
hence retail planning comes into play which helps in providing direction and serves as a basis of
control for any store.
As a buyer, one must provide the right merchandise, at the right place, at the right time, in the
right quantities, and at the right price. Hence to fulfill these goals the retail planning
department helps to plan the merchandise budgets and merchandise assortments.
The merchandise budget or the merchandise plan is a forecast of the specific merchandise
purchase which covers a period of week, month, season and year which is known as:
WTD, MTD, STD and YTD (Weekly, Monthly, Seasonal and Yearly Transaction Details)
1.8)
The retail plan needs to be checked frequently in order to see whether the desired output is
being achieved or not. Retailers need some type of planning and control device to guide their
activity towards the achievement of their stated goals. Retail Planning is done with the help of a
Micro strategy (MSTR), Management Information System (MIS).
Sales forecast can be done in two ways:
Top-Down Planning:
In this type of planning the top management decides the estimated sales for a given period and
then distributing the sales to the individual department according to their past sales
contribution. The top-down forecasting technique has a four step process:
Planning sales goals by reviewing past sales
Planning stock level for each order.
Planning the assortment plan by analyzing the sales potential for specific
products.
Making a sales forecast report.
Bottom-Up Planning:
The planned sales for each department are determined by department head and then the total
sale is estimated by adding them.
This is the category MIS Report showing the sales. If we see this chart it is found that the sales
of the Last Year(LY), Annual Budget Plan(ABP), and the Actual Sales(Act) for each category
(mentioned in the first column) is taken and then the grand total sales is predicted by adding up
the individual category, which as discussed earlier is the Bottom-Up Planning.
1.9)
MERCHANDISE PLAN
Key components of a merchandise plan include sales forecasts and stock planning. In addition,
the amount of merchandise to be purchased each period to generate the planned sales is
calculated. The six-month merchandise plan is the tool that translates profit objectives into a
framework for merchandise planning and control.
A merchandise plan in developed basically on two seasons:
Autumn Winter
Spring Summer
10
MC
NSNT(*)
Description
PT-KOLKATA- April
GARIAHAT
ROAD
Women
Ethnic
Salwar
Kameez Set
56
2.33
PT-KOLKATA- April
GARIAHAT
ROAD
Women
Ethnic
PN Fashion
Basic
Topwear
256625.9
51
2.15
124292.8 110
11
CHAPTER 2
LITERATURE
REVIEW
12
2) LITERATURE REVIEW
2.1)
FORECASTING TECHNIQUE:
13
2.2)
There can certainly be no more important activity in the business organization than the
effective development of sales forecasts and application of these forecasts to the organizations
various functional needs.
Closs, Oaks, & Wisdo (1989) argued that a sales forecast must incorporate
1. The correct use of forecasting techniques,
2. Forecasting systems that effectively interact with the corporate management
information system, and
3. Recognition of the impact of forecasting management philosophy upon ultimate
accuracy.
A substantial gap still exists between applications and what is both desirable and obtainable. An
examination of the forecasting and marketing literature suggests that a structure is needed for
handling the issues that the practitioner must address.
Forecasting Methods for Management by Spyros Makridakis and Steven C. Wheelwright
(1977, Hardcover)
Various functional areas or departments may need on-going information on forecasts and
forecasting accuracy, even though they are not allowed to make changes to forecasts. The
departments that are most often allowed to review forecasts are marketing, finance,
production, sales, and planning. Having access to the sales forecast information as well as the
ability to disseminate the information is important.
Sales Forecasting Management: A Demand Management Approach By John T. Mentzer &
Mark A. Moon)
Behavioral and organizational issues exist when integrating the forecasting system into a
company. An important aspect of the behavior issue involves the interface between the
preparer of forecasts and the users of forecasts. A need exists for a clear definition of tasks and
priorities with regard to forecasting applications as well as a need for respect and
understanding of each other's position.
An important aspect of the organizational issue involves differences among the needs of each
department that uses the forecast.
Forecasting Methods for Management by Spyros Makridakis and Steven C. Wheelwright
(1977, Hardcover)
14
Because the sales forecast is the bonding tool that draws together the different line and
support functions, all of the components of the organization must use the same forecast and
assumptions. A business organization is an integrated group of activities, which requires
coordination and common goals to result in profit for the company.
Evidence has shown that, if there is not a sufficient degree of acceptance of the forecast and its
validity, the different functional areas will in fact develop their own independent forecasts. This
has the obvious effect of creating chaos, inefficiency, and substantial additional costs. The
conflict and chaos created by the use of different sales forecasts can be detrimental to the
organization's efforts and have a variety of undesirable side effects, including high inventory
levels, inventory obsolescence, over utilized or underutilized plants, and unnecessary facilities.
These are serious consequences potentially costing the business millions of dollars in excess
capitalization due to ineffective sales forecasting
(Forecasting in the 1990 by Lawless, 1990).
2.3)
PURPOSE OF FORECASTING
Several empirical studies focused on why businesses produce forecasts and the use they make
of the latter. In White's (1986) survey, 64% of respondents regarded the purpose of a sales
forecast as a goal setting device-a statement of desired performance; only 30% wanted to
derive a true assessment of the market potential. This finding was independent of firm size.
However, smaller firms used sales forecasts more often for personnel planning while for larger
firms sales quota setting and purchasing planning were frequent uses.
Mentzer and Cox (1984) enquired about the first, second and third most important areas of
forecast usage. The majority of firms regarded production planning and budgeting as important
decision areas, a finding also observed by Rothe (1978), McHugh and Sparkes (1983) and
Peterson (1993).
Peterson (1993) also observed among his sample of retailers that smaller firms used sales
forecasts less frequently for planning purposes than larger firms, while Herbig (1994) found
that industrial goods firms regarded the forecasting of industry trends, applications and
technologies as being more important than did consumer goods firms.
2.4)
Steen (1992) studied the importance of team-based forecasting. Both Steen (1992) and Kahn &
Mentzer (1994) concluded that team-based forecasting tends to improve forecast accuracy,
and managers are more satisfied when forecasts are developed with inter-functional efforts.
According to Kahn & Mentzer (1994), four general approaches to sales forecasting exist.
The first approach is one in which each department develops and uses its own sales
forecast. This is called the independent approach.
Graduation Project | BFT NIFT MUMBAI 2010-2014
15
The second approach has only one department responsible for developing the sales
forecast. This is called the concentrated approach.
The third approach has a forecast team comprised of representatives from multiple
departments responsible for developing the sales forecast. This is called the consensus
approach.
Finally, the fourth approach has each department develop its own forecast, but a
forecast team comprised of representatives from multiple departments is responsible
for arriving at the final sales corporate forecast. This is called the negotiated approach.
Approaches one and two are non-team-based approaches, while approaches three and four are
team-based approaches.
Sales Forecasting Management: A Demand Management Approach By John T. Mentzer &
Mark A. Moon)
Gordon, Morris, & Dangerfield (1997) suggested two general approaches to forecasting: topdown (TD) and bottom-up (BU) approaches. In the top-down approach, data are used to
develop a forecast, which is then desegregated into individual units based on their historical
fraction of sales. The bottom-up approach allows each unit to prepare a separate forecast,
which is aggregated. Gordon et al., (1997) concluded that the bottom-up approach outperforms
the top-down approach in improving forecast accuracy.
A goal programming model for hierarchical forecasting by Gordon, Morris, & Dangerfield
(1997)
Forecasts assist marketing managers improve decision-making. In an organizational design
context, forecasting should not be regarded as a self-contained activity, but should be
integrated within the planning context of which it is a part.
Managerial evaluation of sales forecasting by Mahmoud, Rice, & Malhotra, 1988
When an organization has its own forecasting expertise (prepares its own forecasts) that
expertise should not be separated into a self-contained department. Forecasting and planning
functions should be combined. Involvement of the forecasters in planning enables them to
select criteria for evaluating forecasting methods that are meaningful within the planning
context.
Forecasting methods for management by Steven C. Wheelwright, 1988
16
2.5)
ACCURACY IN FORECASTING
Accuracy of forecasts improves when the source of error is identified and corrected. The sales
forecast is critically important in business because it is often the starting point for all operations
or planning. Errors in forecasts have costs, which often are very high. These costs have direct
effects on budgeting, planning, production, and perhaps prices. Despite the errors, forecasts
must be conducted in order to make plans for the future.
Many of the weaknesses of the sales forecasting system appeared to be related to
organizational and structural problems. Due to lack of assigned areas of responsibility, the
consensus forecasting approach worked to dilute forecasting responsibility. A lack of
integration and agreement on control mechanisms across all sales forecasting activities and an
absence of an agreed-upon mechanism to systematically gather sales force input into the
forecasting process existed.
Business forecasting methods by Jarrett, 1987, (Basil Blackwell, Oxford)
2.6)
Clodfelter (1993) mentioned that various internal and external information sources are
available to help forecasting consumer demand and selecting product line in an assortment
plan.
The internal sources may be store records, merchandise plan report, and sales peoples
opinions.
The external sources may include: (a) customer panel, (b) consumer magazines and
trade publications, (c)vendor opinions, (d) trade associations, (e) competitors, (f) fashion
forecasts magazines, and (g)reporting bureaus (i.e., demographic data)
Kline and Wagner (1994) found that records of past sales had moderate effects on retail buyers
decisions. Although the decision-making task involved new merchandise, with no selling history,
selling records for established merchandise may have documented fashion trends and provided
direction for buying new items.
Retail Buying: From Staples to Fashion to Fads by Richard Clodfelter (Feb 1, 1993
17
CHAPTER 3
RESEARCH
METHODOLOGY
18
3) RESEARCH METHODOLOGY
3.1)
Sales forecasting is an essential activity for a retail organization in order to plan the amount of
merchandise which should be available in the stores for a particular time period in order to
meet the customer demands.
Comparing the manual sales forecast with the MIS sales forecast
19
Here, entering previous years date for particular month would generate a report showing the
last year sales as well as the last to last years sale.
The data obtained here is in the raw form and hence it has to be mapped with a Master MC
classification list in order to get the data for each category.
3.3)
There are two broad categories of forecasting techniques: quantitative methods and qualitative
methods. Quantitative methods are based on algorithms of varying complexity, while
qualitative methods are based on educated guessing. I'll focus on quantitative methods here.
QUANTITATIVE METHOD OF FORECASTING
Time Series Method
Time series method has been used to make a forecast purely on historical patterns in
the data. Like forecasting for the month of January 2014 will require the last year sales
for the individual categories as well as the past few years data to come across the
increment factor in the basic sales due to the increase in cost price which in turn results
in the increment of the sales.
20
Time-series method is the most simplest and accurate, particularly over the short term.
Most quantitative forecasting methods try to explain patterns in historical data as a
means of using those patterns to forecast future patterns.
NSNT
NSNT
NSNT
NSNT
NSNT
RGM (LY) GM (LY)%
(2009) (2010)
(2011)
(2012)
(2013)
(2013)
(2013)
346.25 370.54
390.65
422.12
468.13
193.98
46%
300.19 315.45
326.59
355.18
368.07
141.42
40%
231.47
219.64
249.98
235.74
268.36
248.23
285.32
261.42
318.81
293.94
80.46
116.22
28%
44%
84.25
89.35
1181.8 1261.06
94.26
1328.09
100.13
1,424.17
129.40
1,568.35
40.39
572.47
40%
40%
SALES
1181.8
1261.06
1328.09
1424.17
1658.35
INCREMENT FACTOR
6.7
5.31
7.23
10.1
21
2010
2011
2012
22
2013
It can be seen from the table that the increment factor for year 2010 is 6.7%, 2011 is 5.31%,
2012 is 7.23% and for year 2013 is 10.1%.
Hence the mean increment would be,
(6.7 + 5.31 + 7.23 + 10.1) %/4 = 7.33%,
Therefore the grand total sales for week 17-23rd Feb 2014 would be:
=1568.35 + 7.33% of 1568.35 = 1683.31
From the above pie charts it can be seen that the contribution of each category towards the
total sales is almost same over the years hence taking the percentage contribution of each
category for the last year to get the sales for each category as follows:
World Description
LY (NSNT)
Men Total
Women Western Total
Non Apps Total
Women Ethnic Total
Kids Total
Grand Total
30%
23%
20%
19%
8%
ABP (Manual)
30% * 1683.31
23% * 1683.31
20% * 1683.31
19% * 1683.31
8% * 1683.31
504.993
387.1613
336.662
319.8289
134.6648
1683.31
23
GMROI= [RGM(LY)/NSNT(LY)-RGM(LY)]*100
= (572.47/1568.35)*100 = 36.5%
Therefore Stock-to-sales ratio = 36.5/29 = 1.25
Hence the planned stock for 17-23rd Feb 2014 = 1683.31* 1.25 = 2118.73
3.4)
The Annual Budget Plan for a particular month is the Beginning of Month inventory for that particular
month. The BOM is the stock which is available for sale in that particular month.
3.5)
The end of month inventory adds to the beginning of month inventory for the next month. The EOM is
calculated by subtracting the net sales for that particular month from the beginning of month inventory
for a particular period.
MENs
Beginning Of
Month
Inventory
ABP
ACTUAL
SALES (1723rd Feb
2014)
End Of
Month
Inventory
Women Ethnic
30% *
2118.73 =
635.61
504.99
510.36
Women
Non Apps
Western
23% * 2118.73 = 20% *
487.3
2118.73 =
423.74
387.16
336.66
381.24
340.58
319.82
315.89
134.66
131.58
125.25
106.06
86.66
37.91
83.16
KIDS
Similarly the forecasting is done for the next weeks. But one problem with this kind of
forecasting is that it does not consider the product life cycle, launch of a new product or a new
store. Suppose a new product is launched in the market, for that new product the past data is
not available and hence forecast for that product is merely based on the intuition of the buyer.
Due to which the forecast may not be correct.
Hence some new forecasting methods will be applied which would deal with the trend analysis
of the sales data for first few (5 6) weeks of a particular season and then modifying the
forecast calendar which was made earlier. This method will be useful because if we observe the
data for the first few weeks, it would cover all the aspects like current trend of a product,
launch and acceptance of a new product, etc.
Graduation Project | BFT NIFT MUMBAI 2010-2014
24
Since initially we do not have the actual sales value for SS-14 we would do our normal
forecasting for SS-14. But after 5 or 6 weeks when we observe a trend in the sales we follow the
following process for the sales forecasting for the upcoming weeks:
25
CHAPTER 4
IMPLEMENTATION
AND DATA
ANALYSIS
Graduation Project | BFT NIFT MUMBAI 2010-2014
26
4.1)
4.2)
FORECASTING TECHNIQUES
27
To identify the underlying pattern in the data, a useful first step is to construct a time series
plot. A time series plot is a graphical presentation of the relationship between time and the
time series variable; time is on the horizontal axis and the time series values are shown on the
vertical axis. Let us review some of the common types of data patterns that can be identified
when examining a time series plot.
4.3)
TIME SERIES-PLOT:
Let us consider the past 9 weeks sales for different categories of Pantaloons which are
classified as MEN, WOMEN WESTERN, NON APPS, WOMEN ETHNIC and NON APPS.
1) CATEGORY: MENS
WEEKS
th
SEASON
AW-13
AW-13
AW-13
SS-14
SS-14
SS-14
SS-14
SS-14
SS-14
nd
SALES
800
600
400
200
0
0
10
WEEKS
28
SEASON
AW-13
AW-13
AW-13
SS-14
SS-14
SS-14
SS-14
SS-14
SS-14
nd
SALES
500
400
300
200
100
0
0
10
WEEKS
3) CATEGORY: NON APPS
WEEKS
th
nd
SEASON
AW-13
AW-13
AW-13
SS-14
SS-14
SS-14
SS-14
SS-14
SS-14
29
SALES
500
400
300
200
100
0
0
10
WEEKS
4) CATEGORY: WOMEN ETHNIC
WEEKS
th
SEASON
AW-13
AW-13
AW-13
SS-14
SS-14
SS-14
SS-14
SS-14
SS-14
nd
SALES
400
300
200
100
0
0
10
WEEKS
30
5) CATEGORY: KIDS
WEEKS
th
SEASON
AW-13
AW-13
AW-13
SS-14
SS-14
SS-14
SS-14
SS-14
SS-14
nd
SALES
200
150
100
50
0
0
10
WEEKS
4.4)
It is observed that from all the above time series curve only the Women Ethnic category shows a
different pattern which is known as horizontal pattern of trend analysis in which the sales values keeps
on moving around an average value of all the sales figure. The pattern of sales keeps on increasing and
decreasing as the weeks keep on moving.
Hence for these type of sales trends the forecasting technique that are used are described below.
For rest of the categories there could be seen a particular trend of constant rising in the sales values.
Hence for those categories a forecasting tool called as Linear Regression is used in order for sales
forecasting.
31
4.5)
The underlying pattern in the time series is an important factor in selecting a forecasting
method. Thus, a time series plot should be one of the first things developed when trying to
determine what forecasting method to use. If we see a horizontal pattern, then we need to
select a method appropriate for this type of pattern. Similarly, if we observe a trend in the data,
then we need to use a forecasting method that has the capability to handle trend effectively.
Now as I have discussed earlier that the Women Ethnic category shows a horizontal pattern in
the time series plot hence a forecasting technique appropriate for horizontal data pattern will
be used.
4.6)
FORECAST ACCURACY:
In this section let me begin by developing forecast for the women ethnic category using the
simplest of all forecasting methods: an approach that uses the most recent weeks sales value
as a forecast for next week.
For example, the actual sales for week 4 (293.94 Lakh) is used as the sales forecast for the week
5 and the actual sales for the week 5 (320.27) is used as the sales forecast for the week 6 and so
on. Because of the simplicity of this method it is known as the nave forecasting method.
The main question which arises is that how accurate are the forecasts obtained using this naive
forecasting method?
For answering this question several measures of forecast accuracy are checked upon. These
measures are used to determine how well a particular forecasting method is able to reproduce
the time series data that are already available. By selecting the method that has the best
accuracy for the data already known, we hope to increase the likelihood that we will obtain
better forecasts for future time periods. The key concept associated with measuring forecast
accuracy is forecast error, defined as:
32
COMPUTING FORECASTS AND MEASURES OF FORECAST ACCURACY USING THE MOST RECENT
VALUE AS THE FORECAST FOR THE NEXT PERIOD
Week
4 (17th
Feb
23rd Feb)
5 (24th
Feb 2nd
March)
6 (3rd
March
9th
March)
7 (10th
March
16th
March)
8 (17th
March
23rd
March)
9 (24th
March
30th
March)
TOTALS
Actual
Sales
Forecast
Forecast
Error
Absolute
Value Of
Forecast
Error
Squared
Forecast
Error
Percentage Absolute
Error
Value of
Percentage
Error
26.33
26.33
693.26
8.22
8.22
73.4
73.4
5387.56
18.64
18.64
-93.59
93.59
8759.08
-31.18
31.18
59.87
59.87
3584.41
16.63
16.63
-12.76
12.76
162.81
-3.6
3.6
53.25
265.95
18587.12
8.71
78.27
293.94
320.27
393.67
300.08
359.95
347.19
293.94
320.27
393.67
300.08
359.95
The fact that the forecast error is positive indicates that in week 5 the forecasting method
Under estimated the actual value of sales, whereas in week 7 as well as week 9 the forecast
error is negative which indicates that for both these weeks the forecast made is higher than the
actual sales.
A simple measure of forecast accuracy is the mean or average of the forecast errors.
The Table above shows that the sum of the forecast errors as 53.25 thus, the mean or average
forecast error is:
53.25/5 = 10.65
Note that although the Women Western time series consists of 6 values, to compute the mean
error we divided the sum of the forecast errors by 5 because there are only 5 forecast errors.
Because the mean forecast error is positive, the method is under forecasting; in other words,
the observed values tend to be greater than the forecasted values. Because positive and
33
negative forecast errors tend to offset one another, the mean error is likely to be small thus,
the mean error is not a very useful measure of forecast accuracy.
The mean absolute error, denoted MAE, is a measure of forecast accuracy that avoids the
problem of positive and negative forecast errors offsetting one another. MAE is the average of
the absolute values of the forecast errors.
The table shows that the sum of the absolute values of the forecast errors is 265.95 thus,
MAE = average of the absolute value of forecast errors = 265.95/5 = 53.19
Another measure that avoids the problem of positive and negative forecast errors offsetting
each other is obtained by computing the average of the squared forecast errors. This measure
of forecast accuracy, referred to as the mean squared error, is denoted MSE.
From the table the sum of squared errors is 18587.12
MSE = average of the sum of squared forecast errors = 18587.12/5 = 3717.42
The size of MAE and MSE depends upon the scale of the data. As a result, it is difficult to make
comparisons for different time intervals, such as comparing a method of forecasting monthly
sales to a method of forecasting weekly sales, or to make comparisons across different time
series. To make comparisons like these we need to work with relative or percentage error
measures.
The mean absolute percentage error, denoted MAPE, is such a measure. To compute MAPE we
must first compute the percentage error for each forecast.
For example, the percentage error corresponding to the forecast of 293.94 in week 5 is
computed by dividing the forecast error in week 5 by the actual value in week 5 and multiplying
the result by 100. For week 5 the percentage error is computed as follows:
Percentage error for week 5 = (293.94/320.27) * 100 = 8.22%
Thus, the forecast error for week 5 is 8.22% of the observed value in week 5. A complete
summary of the percentage errors is shown in the table in the column labeled Percentage
Error. In the next column, we show the absolute value of the percentage error.
The table shows that the sum of the absolute values of the percentage errors is 78.27 thus,
MAPE = average of the absolute value of percentage forecast errors = 78.27/5 = 15.65%
Summarizing the above result of forecasting:
Nave Method of Sales Forecasting (Women Ethnic)
Forecasting Errors
Value
MAE
53.19
MSE
3717.42
MAPE
15.65
Graduation Project | BFT NIFT MUMBAI 2010-2014
34
4.8)
Week
4 (17th
Feb 23rd
Feb)
5 (24th
Feb 2nd
March)
6 (3rd
March
9th
March)
7 (10th
March
16th
March)
8 (17th
March
23rd
March)
9 (24th
March
30th
March)
Actual
Sales
Forecast
Forecast
Error
Absolute
Value Of
Forecast
Error
Squared
Forecast
Error
Absolute
Percentage Value of
Error
Percentage
Error
293.94
320.27
293.94
26.33
26.33
693.2689
8.221188
8.221188
307.105
86.565
86.565
7493.499
21.98923
21.98923
335.96
-35.88
35.88
1287.374
-11.9568
11.95681
326.99
32.96
32.96
1086.362
9.156827
9.156827
333.582
13.608
123.58
13.608
195.34
185.1777
10745.68
3.919468
31.32
3.919468
55.24
393.67
300.08
359.95
347.19
TOTALS
293.94+320.27
2
35
293.94+320.27+393.67
3
The forecasts obtained using this method for the women western category are shown in
the above table in the column labeled Forecast. Using the results shown in table, the following
values of MAE, MSE, and MAPE are obtained:
MAE =
MSE =
195.34
5
10745 .68
MAPE =
5
55.24
5
= 39.06
= 2149.13
= 11.04
We can now compare the accuracy of the two forecasting methods we have considered
in this section by comparing the values of MAE, MSE, and MAPE for each method.
MAE
MSE
MAPE
Nave Method
53.19
3717.42
15.65
36
Ft+1 =
( ) +1+.++1
=
where,
Week
4 (17th
Feb 23rd
Feb)
5 (24th
Feb 2nd
March)
6 (3rd
March
9th
March)
7 (10th
March
16th
March)
8 (17th
Actual
Sales
Forecast
Error
Absolute
Value Of
Forecast
Error
Squared
Forecast
Error
26.33
26.33
693.2689
8.221188
8.221188
307.105
86.565
86.565
7493.499
21.98923
21.98923
335.96
338.0067
-35.88
21.94333
35.88
21.94333
1287.374
481.5099
-11.9568
6.096217
11.95681
6.096217
Forecast
Absolute
Percentage
Value of
Error
Percentage
Error
293.94
320.27
293.94
393.67
300.08
359.95
37
March
23rd
March)
9 (24th
March
30th
March)
TOTALS
347.19
351.2333
-4.04333
94.91
4.043333
174.76
16.34854
9972
-1.16459
23.18
1.164588
49.42
The term moving is used because every time a new observation becomes available for the time
series, it replaces the oldest observation in the equation and a new average is computed.
As a result, the average will change, or move, as new observations become available.
To illustrate the moving averages method, let us return to the sales of women western category
which has a horizontal pattern in time series. Thus, the smoothing methods of this section are
applicable.
To use moving averages to forecast a time series, we must first select the order, or number of
time series values, to be included in the moving average. If only the most recent values of the
time series are considered relevant, a small value of k is preferred. If more past values are
considered relevant, then a larger value of k is better. As mentioned earlier, a time series with a
horizontal pattern can shift to a new level over time. A moving average will adapt to the new
level of the series and resume providing good forecasts in k periods. Thus, a smaller value of k
will track shifts in a time series more quickly. But larger values of k will be more effective in
smoothing out the random fluctuations over time. So managerial judgment based on an
understanding of the behavior of a time series is helpful in choosing a good value for k.
To illustrate how moving averages can be used to forecast sales, we will use a three-week
moving average (k = 3). We begin by computing the forecast of sales in week 5 which is the
actual sales in week 4. For week 6 the forecast is done by taking the average of week 4 and 5
sales.
For week 7 onwards:
293.94+320.27+393.67
3
= 335.96
320.27+393.67+300.08
3
= 338
The forecasts obtained using this method for the women western category are shown in
the above table in the column labeled Forecast. Using the results shown in table, the following
values of MAE, MSE, and MAPE are obtained:
38
MAE =
MSE =
174.76
5
9972
MAPE =
Nave Method
MAE
MSE
MAPE
53.19
3717.42
15.65
= 1994.4
49.42
5
= 34.95
= 9.88
Average Sales
Method
39.06
2149.13
11.04
Moving Average
Method
34.95
1994.4
9.88
The above relation shows that the forecast for period t + 1 is a weighted average of the actual
value in period t and the forecast for period t. The weight given to the actual value in period t is
the smoothing constant and the weight given to the forecast in period t is 1 .
Graduation Project | BFT NIFT MUMBAI 2010-2014
39
It turns out that the exponential smoothing forecast for any period is actually a weighted
average of all the previous actual values of the time series. Let us illustrate by working with a
time series involving only three periods of data: Y1, Y2, and Y3.
To initiate the calculations, we let F1 equal the actual value of the time series in period 1, that
is, F1 = Y1. Hence, the forecast for period 2 is
F2 = aY1 + (1-a)F1
= aY1 + (1-a)Y1
= Y1
We see that the exponential smoothing forecast for period 2 is equal to the actual value of the
time series in period 1.
The forecast for period 3 is:
F4 = aY3 + (1-a)F3
= aY3 + (1-a)[ aY2 + (1-a)Y1]
= aY3 + a(1-a)Y2 + (1-a)2Y1
We now see that F4 is a weighted average of the first three time series values. The sum of the
coefficients, or weights, for Y1, Y2, and Y3 equals 1. A similar argument can be made to show
that, in general, any forecast Ft+1 is a weighted average of all the previous time series values.
Despite the fact that exponential smoothing provides a forecast that is a weighted average of
all past observations, all past data do not need to be saved to compute the forecast for the next
period. In fact, equation shows that once the value for the smoothing constant is selected,
only two pieces of information are needed to compute the forecast Yt, the actual value of the
time series in period t, and Ft, the forecast for period t.
To illustrate the exponential smoothing approach, let us consider the women ethnic
sales. As indicated previously, to start the calculations we set the exponential smoothing
forecast for period 2 equal to the actual value of the time series in period 1. Thus, with
Y1 = 293.94, we set F2 = 293.94 to initiate the computations.
Referring to the time series data we find an actual time series value in period 2 of Y2 = 320.94
Continuing with the exponential smoothing computations using a smoothing constant
of = .2, we obtain the following forecast for period 3:
40
SUMMARY OF THE EXPONENTIAL SMOOTHING FORECASTS AND FORECAST ERRORS FOR THE
WOMEN ETHNIC TIME SERIES WITH SMOOTHING CONSTANT = .2
Week
4 (17th
Feb 23rd
Feb)
5 (24th
Feb 2nd
March)
6 (3rd
March
9th
March)
7 (10th
March
16th
March)
8 (17th
March
23rd
March)
9 (24th
March
30th
March)
TOTALS
Actual
Sales
Forecast
Absolute
Value Of
Forecast
Error
Forecast
Error
Squared
Forecast
Error
Absolute
Percentage
Value of
Error
Percentage
Error
293.94
320.27
293.94
26.33
26.33
693.2689
8.221188
8.221188
320.27
73.4
73.4
5387.56
18.64506
18.64506
318.09
-18.01
18.01
324.3601
-6.00173
6.001733
314.48
45.47
45.47
2067.521
12.63231
12.63231
323.54
23.65
150.84
23.65
186.86
559.3225
9032
6.811832
40.3
6.811832
52.31
393.67
300.08
359.95
347.19
The forecasts obtained using this method for the women western category are shown in
the above table in the column labeled Forecast. Using the results shown in table, the following
values of MAE, MSE, and MAPE are obtained:
MAE =
186.86
5
9032
= 37.37
= 1806
5
Graduation Project | BFT NIFT MUMBAI 2010-2014 41
MSE =
MAPE =
52.31
5
= 10.46
4.12) COMPARISON OF VARIOUS FORECASTING TECHNIQUES TO FIND OUT THE BEST LOGIC
FOR THE MIS
Nave Method
MAE
MSE
MAPE
53.19
3717.42
15.65
Average Sales
Method
39.06
2149.13
11.04
Moving Average
Method
34.95
1994.4
9.88
EXPONENTIAL
SMOOTHING
37.37
1806
10.46
From the above chart it can be seen that the Moving Average Method is showing the least
MAPE as well as the MAE and the MSE is also very low as compared to the Nave as well as the
Average sales method.
Hence for the MIS Automation of sales forecasting for the women ethnic category the sales
forecasting tool which will be used is the Moving Average Method.
Tt = b0 + b1t
Where,
42
WEEKS
th
SEASON
SS-14
SS-14
SS-14
SS-14
SS-14
SS-14
rd
In the above table the time variable begins at t=1 corresponding to the first time series
observation and continues until t=6 corresponding to the most recent time series observation.
Formulas for computing the excessive regression coefficients (b 0 and b1) are:
B1=
=1 6 ^ 2
B0 = Y^-b1t^
Where,
Yt = value of the time series in period t
Y^ = average value of the time series
t^ = average value t
To compute the linear trend equation for the mens category time series, we begin the
calculations by computing and using the information in Table above:
t^ = 21/6 = 3.5
Y^ = 3626.44/6 = 604.4
Using these values we can compute the slope and intercept of the trend line:
43
t
1
2
3
4
5
6
21
TOTALS
Yt
548.13
546.85
551.58
603.63
660.83
715.42
3626.44
t-t^
-2.5
-1.5
-0.5
0.5
1.5
2.5
Yt-Y^
-56.27
-57.55
-52.82
-0.77
56.43
111.02
(t-t^)(Yt-Y^)
140.675
86.325
26.41
-0.385
84.645
277.55
615.22
(t-t^)2
6.25
2.25
0.25
0.25
2.25
6.25
17.5
SUMMARY OF THE LINEAR TREND FORECASTS AND FORECAST ERRORS FOR THE MENs TIME
SERIES
Actual
Sales
Week
1
2
3
4
5
6
548.13
546.85
551.58
603.63
660.83
715.42
Forecast
522.52
557.67
592.82
627.97
663.12
698.27
Absolute
Absolute
Squared
Value Of
Percentage Value of
Forecast
Forecast
Error
Percentage
Error
Error
Error
25.61
655.8721
4.672249
4.672249
10.82
117.0724
1.978605
1.978605
41.24
1700.738
7.476703
7.476703
24.34
592.4356
4.032271
4.032271
2.29
5.2441
0.346534
0.346534
17.15
294.1225
2.397193
2.397193
121.45
3365.48
20.9
20.9
Forecast
Error
25.61
-10.82
-41.24
-24.34
-2.29
17.15
TOTALS
The forecasts obtained using this method for the Mens category are shown in
the above table in the column labeled Forecast. Using the results shown in table, the following
values of MAE, MSE, and MAPE are obtained:
MAE =
MSE =
121.45
6
3365 .48
MAPE =
6
20.9
6
= 20.24
= 560.91
= 3.48
44
WEEKS
th
SEASON
SS-14
SS-14
SS-14
SS-14
SS-14
SS-14
rd
To compute the linear trend equation for the mens category time series, we begin the
calculations by computing and using the information in Table above:
t^ = 21/6 = 3.5
Y^ = 2417/6 = 402.83
Using these values we can compute the slope and intercept of the trend line:
t
TOTALS
1
2
3
4
5
6
21
Yt
318.81
330.81
331.53
425.9
492.77
517.18
2417
t-t^
-2.5
-1.5
-0.5
0.5
1.5
2.5
Yt-Y^
-84.02
-72.02
-71.3
23.07
89.94
114.35
(t-t^)(Yt-Y^)
210.05
108.03
35.65
11.535
134.91
285.875
786.05
(t-t^)2
6.25
2.25
0.25
0.25
2.25
6.25
17.5
45
Week
1
2
3
4
5
6
TOTALS
Actual
Sales
318.81
330.81
331.53
425.9
492.77
517.18
Forecast
308.55
353.46
398.37
443.28
488.19
533.1
Absolute
Absolute
Squared
Value Of
Percentage Value of
Forecast
Forecast
Error
Percentage
Error
Error
Error
10.26 105.2676
3.218218
3.218218
22.65 513.0225
6.846831
6.846831
66.84 4467.586
20.16107
20.16107
17.38 302.0644
4.08077
4.08077
4.58
20.9764
0.92944
0.92944
15.92 253.4464
3.078232
3.078232
137.63
5662.36
38.31
38.31
Forecast
Error
10.26
-22.65
-66.84
-17.38
4.58
-15.92
The forecasts obtained using this method for the Non Apps category are shown in
the above table in the column labeled Forecast. Using the results shown in table, the following
values of MAE, MSE, and MAPE are obtained:
MAE =
MSE =
137.63
6
5662 .36
MAPE =
6
38.31
6
= 22.93
= 943.72
= 6.38
46
WEEKS
th
SEASON
SS-14
SS-14
SS-14
SS-14
SS-14
SS-14
rd
To compute the linear trend equation for the mens category time series, we begin the
calculations by computing and using the information in Table above:
t^ = 21/6 = 3.5
Y^ = 2888.49/6 = 481.41
Using these values we can compute the slope and intercept of the trend line:
t
TOTALS
1
2
3
4
5
6
21
Yt
368.07
378.94
445.81
491.07
587.36
617.24
2888.49
t-t^
-2.5
-1.5
-0.5
0.5
1.5
2.5
Yt-Y^
-113.34
-102.47
-35.6
9.66
105.95
135.83
(t-t^)(Yt-Y^)
283.35
153.705
17.8
4.83
158.925
339.575
958.15
(t-t^)2
6.25
2.25
0.25
0.25
2.25
6.25
17.5
47
Week
1
2
3
4
5
6
TOTALS
Actual
Sales
368.07
378.94
445.81
491.07
587.36
617.24
Forecast
344.53
399.28
454.03
508.78
563.53
618.28
Absolute
Absolute
Squared
Value Of
Percentage Value of
Forecast
Forecast
Error
Percentage
Error
Error
Error
23.54 554.1316
6.395523
6.395523
20.34 413.7156
5.367604
5.367604
8.22
67.5684
1.843835
1.843835
17.71 313.6441
3.60641
3.60641
23.83 567.8689
4.057137
4.057137
1.04
1.0816
0.168492
0.168492
94.68
1918.01
21.43
21.43
Forecast
Error
23.54
-20.34
-8.22
-17.71
23.83
-1.04
The forecasts obtained using this method for the Women Western category are shown in the
above table in the column labeled Forecast. Using the results shown in table, the following
values of MAE, MSE, and MAPE are obtained:
MAE =
MSE =
94.68
6
= 15.78
1918.01
MAPE =
6
21.43
6
= 319.66
= 3.57
48
WEEKS
th
SEASON
SS-14
SS-14
SS-14
SS-14
SS-14
SS-14
rd
To compute the linear trend equation for the mens category time series, we begin the
calculations by computing and using the information in Table above:
t^ = 21/6 = 3.5
Y^ = 1074.6/6 = 179.1
Using these values we can compute the slope and intercept of the trend line:
t
TOTALS
1
2
3
4
5
6
21
Yt
129.4
128.4
147.78
200
218.41
250.61
179.1
t-t^
-2.5
-1.5
-0.5
0.5
1.5
2.5
Yt-Y^
-49.7
-50.7
-31.32
20.9
39.31
71.51
(t-t^)(Yt-Y^)
124.25
76.05
15.66
10.45
58.965
178.775
464.15
(t-t^)2
6.25
2.25
0.25
0.25
2.25
6.25
17.5
49
Week
1
2
3
4
5
6
TOTALS
Actual
Sales
129.4
128.4
147.78
200
218.41
250.61
Forecast
112.8
139.32
165.84
192.36
218.88
245.4
Forecast
Error
16.6
-10.92
-18.06
7.64
-0.47
5.21
Absolute
Absolute
Squared
Value Of
Percentage Value of
Forecast
Forecast
Error
Percentage
Error
Error
Error
16.6
275.56
12.82844
12.82844
10.92 119.2464
8.504673
8.504673
18.06 326.1636
12.22087
12.22087
7.64
58.3696
3.82
3.82
0.47
0.2209
0.215192
0.215192
5.21
27.1441
2.078927
2.078927
59.9
806.7
39.66
39.66
The forecasts obtained using this method for the Women Western category are shown in the
above table in the column labeled Forecast. Using the results shown in table, the following
values of MAE, MSE, and MAPE are obtained:
MAE =
MSE =
59.9
6
806.7
MAPE =
= 9.98
= 134.45
39.66
6
= 6.61
50
ABP(Annual Budget Plan) and RGM(Rupee Gross Margin) date wise for a
particular month:
The ABP is the Annual Budget Plan which is basically the sales forecasting that has been
discussed in the PHASE I of the MIS Automation. Initially the ABP was provided by the planning
team but as already discussed the ABP has also been automized.
The RGM is the Rupee Gross Margin which is the difference between the cost of goods sold
which is the basic cost and the actual sales value.
Graduation Project | BFT NIFT MUMBAI 2010-2014
51
Article Hierarchy:
Each product that is assigned to a particular article ID contains certain MC code against itself.
Article Hierarchy is a master file which contains the MC-Codes along with the World, Type,
Division, Brand and MC Description.
The article wise sales which is extracted from the MSTR is only on the basis of article ID and
does not contain the detailed description of the product hence to categorize the sales in the
category of Mens, Women Western, Non Apps, Women Ethnic and Kids the article hierarchy is
needed.
Space Master:
The space master consists of the total area of the pantaloons store - wise in square foot. It is
required in order to calculate the SSPD which is Sales per Square Foot Per Day.
For example, one category of pantaloons is Women Ethnic under which there is a brand named
as Akkriti have a salable merchandise as Ethnic young. So for that particular brand which is the
space allocated for the different pantaloons stores is the space master.
52
53
The cells marked in green are the columns which has to be included in the MIS Reports
whereas the cells which are white are the logics on the basis of which the columns has
to be developed.
4.20) BUILDING THE LOGICS FOR THE CALCULATED FIELDS IN THE MIS
REPORT:
NSNT: Net Sales Value Total Tax Amount:
NSNT is the Net Sales Nil Tax. It is the sales value which does not contain the tax amount in it.
From the article wise sales we get two separate columns, one is the Net Sales Value which is the
total value of a merchandise including the Tax and another column which is known as the Total
Tax amount. Hence subtracting Total Tax Amount from the Net Sales Value will give the NSNT.
Gr% over LY = (Act Sales-LY Sales)/LY sales *100 %:
Growth %age over the last year denotes that by how much the merchandize sales value or
volume has increased over the last year. A positive sign indicates that the business for a
particular product has made a growth over the last year whereas a negative sign indicates that
the business has been in a loss.
ASP = Sales Value / Sales Quantity:
Suppose for the kids category we have to find out the average selling price, then for that we
have to take the total sales figure of the kids category as well as the total quantity of all the
merchandize available in the kids category. Hence the average selling price for a merchandize in
the kids category is the total sales value divided by the total sales quantity.
54
ALL LTL
ALL ABP
55
IM LY% - No Color
IM ACT%
MD LY% - No Color
MD ACT%
Once all the data is gathered it is given to the MIS team which generates the sales
report for that particular week.
Since every week there are some new MC codes which are created hence those MC
codes do not have a classification of the World, Type, Division, Brand, and Product
description hence for that particular week the sales that for those MC Codes are
classified as not defined and for future prospects those MCs needs to be classified so
that the sales figure for each world description is defined.
After the MIS report is generated it has to be validated with the base data that is
provided to the MIS team
The base data which is the Article wise sales report has to be looked up with MIS Master
in order to arrange it in the form of World, Type and Division.
There are certain fields like the ABP, RGM the current week sales figure as well as the
quantity which has to matched directly with the base data, where as there are some
calculated fields like the Growth over last year, the Average Selling Price(ASP), GM%,
IM%, and the MD%.
56
57
Site Master
A site master contains a detailed description about the Pantaloons sites that whether it
is a store or a warehouse, whether the site is currently active. A site master is used to
classify the store as well as the warehouse stock quantity.
58
PO-GRN Report:
The PO-GRN report is used to find out the bought quantity of the goods that are made in a
particular time period.
Stock Report:
The stock report takes into consideration that how much stock is available in the stores as well
as the warehouse. The stock report contains both this year season store stock quantity as well
as last year season store stock quantity.
Prepack Article Color and Quantity:
Out of all the given parameters the first four is a one-time data whereas the PO-GRN, Stock and
prepack article color and quantity has to be given every week.
PO-GRN and Stock report has to be extracted from the MSTR whereas the prepack color and
quantity is derived from the SAP.
For the Prepack color and quantity first of all the prepack article has to found out from the
stock report and then a Prepack-BOM relation has to be derived. From the BOM a BOMComponent-Quantity relation has to be taken out. Finally for a particular component its color
has to be derived.
59
se16
60
61
CLICK HERE
Clear these
62
63
64
se16
Table Name:
stop
65
Make a notepad file of all the components generated in order to create a component color
relation.
3) COMPONENT-COLOR RELATION:
Table Code:
sq01
66
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68
69
CHAPTER 5
RESULTS
70
MENs CATEGORY:
As we have seen that for the Mens Category, Linear Regression method of sales forecasting is
used hence with this method predicting the sales for the next four weeks.
1 (17-23 FEB)
2 (24-2 MAR)
3 (3-9MAR)
4 (10-16MAR)
5 (17-23MAR)
6 (24-30MAR)
7 (31-6APR)
8 (7-13APR)
9 (14-20APR)
10(21-27APR)
ACTUAL
SALES
Earlier Sales
Forecasting
Linear
Regression
Method of Sales
Forecasting
Forecasti
ng Error
Earlier
Error
%age
548.13
546.85
551.58
603.63
660.83
715.42
745.68
794.35
815.26
845.67
735.68
751.64
698.04
833.62
841.42
943.81
951.4
959.35
980.43
899.49
522.52
557.67
592.82
627.97
663.12
698.27
733.42
768.57
803.72
838.87
-187.55
-204.79
-146.46
-229.99
-180.59
-228.39
-205.72
-165
-165.17
-53.82
-34.2
-37.4
-26.6
-38.1
-27.3
-31.9
-27.6
-20.8
-20.3
-6.4
Forecasti Error
ng Error %age
New
25.6
-10.8
-41.2
-24.3
-2.3
17.2
12.3
25.8
11.5
6.8
4.67
-1.98
-7.48
-4.03
-0.35
2.4
1.64
3.25
1.42
0.80
The above table shows the comparison of sales forecast with the help of Linear Regression
method for the week 7 to week 10 with respect to the manual sales forecasting as well as the
actual sales that took place.
It can be clearly seen from the above table that the sales forecast for the week 7 with the
manual sales forecast is showing a percentage error of 27.6% where as with the linear
regression method it is showing a percentage error of just 1.64%.
Similarly for the week 8, 9 and 10 also the percentage error in case of the linear regression
method is much less than that of the manual sales forecast.
NOTE: The negative sign in the forecasting %age error shows that the actual sales is less that
the predicted sales.
5.3)
1 (17-23 FEB)
2 (24-2 MAR)
318.81
330.81
Earlier Sales
Forecasting
Linear
Regression
Method of
Sales
Forecasting
337.61
347.38
308.55
353.46
Forecasting Error
Error Earlier %age
-18.8
-16.6
-5.9
-5
Forecasti
ng Error
New
10.3
-22.7
71
Error
%age
3.2
-6.8
3 (3-9MAR)
4 (10-16MAR)
5 (17-23MAR)
6 (24-30MAR)
7 (31-6APR)
8 (7-13APR)
9 (14-20APR)
10(21-27APR)
331.53
425.9
492.77
517.18
549.31
597.81
635.34
670.58
238.26
406.28
409.85
458.66
478.35
490.56
512.85
568.69
398.37
443.28
488.19
533.1
578.01
622.92
667.83
712.74
93.3
19.6
82.9
58.5
70.96
107.25
122.49
101.89
28.1
4.6
16.8
11.3
12.9
17.9
19.3
15.2
-66.8
-17.4
4.6
-15.9
-28.7
-25.11
-32.49
-42.16
-20.2
-4.1
0.9
-3.1
-5.2
-4.2
-5.1
-6.3
The above table shows the comparison of sales forecast with the help of Linear Regression
method for the week 7 to week 10 with respect to the manual sales forecasting as well as the
actual sales that took place.
It can be clearly seen from the above table that the sales forecast for the week 7 with the
manual sales forecast is showing a percentage error of 12.9% where as with the linear
regression method it is showing a percentage error of just 5.2%.
Similarly for the week 8, 9 and 10 also the percentage error in case of the linear regression
method is much less than that of the manual sales forecast.
5.4)
KIDS CATEGORY:
ACTUAL
SALES
1 (17-23 FEB)
2 (24-2 MAR)
3 (3-9MAR)
4 (10-16MAR)
5 (17-23MAR)
6 (24-30MAR)
7 (31-6APR)
8 (7-13APR)
9 (14-20APR)
10(21-27APR)
129.4
128.4
147.78
200
218.41
250.61
279.52
299.98
315.26
346.87
Earlier Sales
Forecasting
Linear
Regression
Method of
Sales
Forecasting
114.07
115.69
167.38
251.77
255.12
288.37
299.31
288.63
298.11
276.38
112.8
139.32
165.84
192.36
218.88
245.4
271.92
298.44
324.96
351.48
Forecasting Error
Error Earlier %age
15.33
12.71
-19.6
-51.77
-36.71
-37.76
-19.79
11.35
17.15
70.49
11.8
9.9
-13.3
-25.9
-16.8
-15.1
-7.1
3.8
5.4
20.3
Forecasti
ng Error
New
16.6
-10.92
-18.06
7.64
-0.47
5.21
7.6
1.54
-9.7
-4.61
Error
%age
12.8
-8.5
-12.2
3.8
-0.2
2.1
2.7
0.5
-3.1
-1.3
The above table shows the comparison of sales forecast with the help of Linear Regression
method for the week 7 to week 10 with respect to the manual sales forecasting as well as the
actual sales that took place.
72
It can be clearly seen from the above table that the sales forecast for the week 7 with the
manual sales forecast is showing a percentage error of 7.1% where as with the linear regression
method it is showing a percentage error of just 2.7%.
Similarly for the week 8, 9 and 10 also the percentage error in case of the linear regression
method is much less than that of the manual sales forecast.
5.5)
1 (17-23 FEB)
2 (24-2 MAR)
3 (3-9MAR)
4 (10-16MAR)
5 (17-23MAR)
6 (24-30MAR)
7 (31-6APR)
8 (7-13APR)
9 (14-20APR)
10(21-27APR)
368.07
378.94
445.81
491.07
587.36
617.24
652.34
701.26
756.79
799.85
Earlier Sales
Forecasting
Linear
Regression
Method of
Sales
Forecasting
436.23
445.21
507.82
579.69
589.25
650.43
683.75
655.01
675.08
626.16
344.53
399.28
454.03
508.78
563.53
618.28
673.03
727.78
782.53
837.28
Forecasting Error
Error Earlier %age
-68.16
-66.27
-62.01
-88.62
-1.89
-33.19
-31.41
46.25
81.71
173.69
-18.52
-17.49
-13.91
-18.05
-0.32
-5.38
-4.8
6.6
10.8
21.7
Forecasti
ng Error
New
23.54
-20.34
-8.22
-17.71
23.83
-1.04
-20.69
-26.52
-25.74
-37.43
Error
%age
6.4
-5.37
-1.84
-3.61
4.06
-0.17
-3.2
-3.8
-3.4
-4.7
The above table shows the comparison of sales forecast with the help of Linear Regression
method for the week 7 to week 10 with respect to the manual sales forecasting as well as the
actual sales that took place.
It can be clearly seen from the above table that the sales forecast for the week 7 with the
manual sales forecast is showing a percentage error of 4.8% where as with the linear regression
method it is showing a percentage error of just 3.2%.
Similarly for the week 8, 9 and 10 also the percentage error in case of the linear regression
method is much less than that of the manual sales forecast.
73
5.6)
1 (17-23 FEB)
2 (24-2 MAR)
3 (3-9MAR)
4 (10-16MAR)
5 (17-23MAR)
6 (24-30MAR)
7 (31-6APR)
8 (7-13APR)
9 (14-20APR)
10(21-27APR)
293.94
320.27
393.67
300.08
359.95
347.19
342.56
372.86
386.47
359.68
Earlier Sales
Forecasting
Linear
Regression
Method of
Sales
Forecasting
344.61
355.01
344.87
347.52
389.78
428.35
410.69
468.98
475.32
293.94
307.105
335.96
338.0067
351.2333
335.74
341.66
342.87
340.09
Forecasting Error
Error Earlier %age
-24.3
38.7
-44.8
12.4
-42.6
-85.79
-37.83
-82.51
-115.64
-7.6
9.8
-14.9
3.5
-12.3
-25.0
-10.1
-21.3
-32.2
Forecasti
ng Error
New
Error
%age
26.3
86.6
-35.9
21.9
-4
6.82
31.2
43.6
19.59
8.2
22
-12
6.1
-1.2
2.0
8.4
11.3
5.4
As already discussed earlier that for the women ethnic category the sales forecasting technique
that has to be used is moving average method for which we have to take the sales values for
the previous three weeks, hence if we have to forecast for the week 7 then we take the sales
values from week 4 6. But from week 7 onwards we do not have the actual sales values and
therefore for predicting the sales for the future weeks we have to take the forecast values.
So for week 8 we take the actual sales values of week 5 and 6 and forecast sales values of week
7. Similarly for week 9 we have to take the actual sales value of week 6 and forecast sales
values of week 7 and 8.
After week 9 we have to consider the forecasted sales values in order to predict the future
sales.
The above table shows the comparison of sales forecast with the help of Linear Regression
method for the week 7 to week 10 with respect to the manual sales forecasting as well as the
actual sales that took place.
It can be clearly seen from the above table that the sales forecast for the week 7 with the
manual sales forecast is showing a percentage error of 4.8% where as with the linear regression
method it is showing a percentage error of just 3.2%.
Similarly for the week 8, 9 and 10 also the percentage error in case of the linear regression
method is much less than that of the manual sales forecast.
74
CHAPTER 6
CONCLUSION
75
6.1)
My objective through this project was to help in automizing the sales analysis as well as the
sales forecasting by building and providing the logics for the MIS. The various mentioned
analysis for the sales forecasting were horizontal as well as trend pattern of sales data, where
horizontal pattern is that where the sales data keeps on increasing as well as decreasing around
a constant mean which in this case was applicable to the women ethnic category.
Whereas the trend pattern is that where there is a constant rise in the sales data over a period
of time for which a linear regression method of sales forecast is applicable and in my project it
is applied to the Mens, Kids, Non-Apps as well as the Women Western Category.
This project has shown that with these methods of sales forecasting the percentage error from
the actual sales has decreased leading to an increase in the forecast accuracy.
An accurate sales forecasting would lead to the following conclusions:
Increased Turnover:
Merchandise that customers want is more readily available at times when they want to
make purchases.
Maximized Profits:
A balanced assortment of merchandise leads to more sales and an increase in profits
because items will not remain in stock for too long and would be difficult to sell. Greater
profits can result because the buyer is informed about both fast-selling items that should be
reordered quickly and slow-selling items that should be dropped.
76
CHAPTER 7
REFRENCES
77
7.1)
BOOKS:
7.2)
http://www.forecastingprinciples.coM
http://fearp.usp.br/marketing/artigos/
http://faculty.philau.edu/frankc/ntc/s01-ph10
http://arxiv.org/ftp/arxiv/papers/1303/1303.0117
7.3)
WEBSITES:
http://sbinfocanada.about.com/od/cashflowmgt/a/salesforecast.htm
http://smallbusiness.chron.com/methods-techniques-sales-forecasting-4693.html
http://managementinnovations.wordpress.com/2008/12/11/methods-of-salesforecasting/
http://blog.getbase.com/5-essential-sales-forecasting-techniques
78