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MIS Automation For Accurate Sales Forecasting Sales Analysis and Stock Planning
MIS Automation For Accurate Sales Forecasting Sales Analysis and Stock Planning
BY
ANKIT GHOSH
M/BFT/10/05
(2010-14)
5) RESULTS …………………………………………………………………………………………………………….…69
5.1) RESULT FROM THE PHASE I OF MIS AUTOMATION …………………………………………70
5.2) MEN’s 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
INTRODUCTION
Realistic assortment planning for a particular market or product has become a difficult task in
today’s 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
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) FASHION SELLING PERIOD
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.
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.
Autumn Winter
Spring Summer
LITERATURE
REVIEW
Along with qualitative and quantitative, forecasting models can be categorized as time-series,
causal, and judgmental. A time-series model uses past data as the basis for estimating future
results. The models that fall into this category include decomposition, moving average,
exponential smoothing, and Box-Jenkins. The premise of a causal model is that a particular
outcome is directly influenced by some other predictable factor. These techniques include
regression models. Judgmental techniques are often called subjective because they rely on
intuition, opinions, and probability to derive the forecast. These techniques include expert
opinion, Delphi, sales force composite, customer expectations (customer surveys), and
simulation
(Kress, G., 1985, Practical techniques of business forecasting, Westport)
Typically, the two forms of forecasting error measures used to judge forecasting performance
are mean absolute deviation (MAD) and mean absolute percentage error (MAPE). For both
MAD and MAPE, a lower absolute value is preferred to a higher absolute value. MAD is the
difference between the actual sales and the forecast sales, absolute values are calculated over
a period of time, and the mean is derived from these absolute differences. MAPE is used with
large amounts of data, and forecasters may prefer to measure error in percentage
(Business Forecasting with Student CD [J. Holton Wilson, Barry Keating, Tata McGrawHill)
Three planning horizons for forecasting exist. The short-term forecast usually covers a period of
less than three months. The medium-term forecast usually covers a period of three months to
two years. And, the long-term forecast usually covers a period of more than two years.
Generally, the short-term forecast is used for the daily operation and plans of a company. The
long-term forecast is used more for strategic planning.
Forecasting systems for operations management: Stephen A. Delurgio and Carl
D.Bhame, 1991, (Business One Irwin, Homewood, IL)
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)
The first approach is one in which each department develops and uses its own sales
forecast. This is called the independent approach.
Approaches one and two are non-team-based approaches, while approaches three and four are
team-based approaches.
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.
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
RESEARCH
METHODOLOGY
Comparing the manual sales forecast with the MIS sales forecast
Here, entering previous year’s date for particular month would generate a report showing the
last year sales as well as the last to last year’s 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.
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.
2011 2012
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:
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.
IMPLEMENTATION
AND DATA
ANALYSIS
1000
800
SALES
600
400
200
0
0 2 4 6 8 10
WEEKS
400
300
200
100
0
0 2 4 6 8 10
WEEKS
SALES 500
400
300
200
100
0
0 2 4 6 8 10
WEEKS
500
400
SALES
300
200
100
0
0 2 4 6 8 10
WEEKS
250
200
SALES
150
100
50
0
0 2 4 6 8 10
WEEKS
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.
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 week’s 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 naïve 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:
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
The table shows that the sum of the absolute values of the forecast errors is 265.95 thus,
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
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:
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%
Absolute Absolute
Squared
Actual Forecast Value Of Percentage Value of
Week Forecast Forecast
Sales Error Forecast Error Percentage
Error
Error Error
4 (17th
Feb – 23rd 293.94
Feb)
5 (24th
Feb – 2nd 320.27 293.94
March) 26.33 26.33 693.2689 8.221188 8.221188
6 (3rd
March –
393.67
9th
March) 307.105 86.565 86.565 7493.499 21.98923 21.98923
7 (10th
March –
300.08
16th
March) 335.96 -35.88 35.88 1287.374 -11.9568 11.95681
8 (17th
March –
359.95
23rd
March) 326.99 32.96 32.96 1086.362 9.156827 9.156827
9 (24th
March –
347.19
30th
March) 333.582 13.608 13.608 185.1777 3.919468 3.919468
TOTALS 123.58 195.34 10745.68 31.32 55.24
293.94+320.27
Forecast for week 6 =
2
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:
195.34
MAE = = 39.06
5
10745 .68
MSE = = 2149.13
5
55.24
MAPE = = 11.04
5
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.
In this section I will discuss three forecasting methods that are appropriate for a time series
with a horizontal pattern:
Moving averages
Weighted moving averages and
Exponential smoothing.
These methods also adapt well to changes in the level of a horizontal pattern.
However, without modification they are not appropriate when significant trend, cyclical, or
seasonal effects are present. Because the objective of each of these methods is to “smooth
out” the random fluctuations in the time series, they are referred to as smoothing methods.
These methods are easy to use and generally provide a high level of accuracy for short-range
forecasts, such as a forecast for the next time period.
where,
Absolute Absolute
Squared
Actual Forecast Value Of Percentage Value of
Week Forecast Forecast
Sales Error Forecast Error Percentage
Error
Error Error
4 (17th
Feb – 23rd 293.94
Feb)
5 (24th
Feb – 2nd 320.27 293.94
March) 26.33 26.33 693.2689 8.221188 8.221188
6 (3rd
March –
393.67
9th
March) 307.105 86.565 86.565 7493.499 21.98923 21.98923
7 (10th
March –
300.08
16th
March) 335.96 -35.88 35.88 1287.374 -11.9568 11.95681
8 (17th 359.95 338.0067 21.94333 21.94333 481.5099 6.096217 6.096217
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
F7 = average of weeks 4-6 = = 335.96
3
320.27+393.67+300.08
F8 = average of weeks 5-7 = = 338
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:
9972
MSE = = 1994.4
5
49.42
MAPE = = 9.88
5
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 α and the weight given to the forecast in period t is 1 – α.
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:
Finally, substituting this expression for F3 in the expression for F4, we obtain
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 α 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 α = .2, we obtain the following forecast for period 3:
Absolute Absolute
Squared
Actual Forecast Value Of Percentage Value of
Week Forecast Forecast
Sales Error Forecast Error Percentage
Error
Error Error
4 (17th
Feb – 23rd 293.94
Feb)
5 (24th
Feb – 2nd 320.27 293.94
March) 26.33 26.33 693.2689 8.221188 8.221188
6 (3rd
March –
393.67
9th
March) 320.27 73.4 73.4 5387.56 18.64506 18.64506
7 (10th
March –
300.08
16th
March) 318.09 -18.01 18.01 324.3601 -6.00173 6.001733
8 (17th
March –
359.95
23rd
March) 314.48 45.47 45.47 2067.521 12.63231 12.63231
9 (24th
March –
347.19
30th
March) 323.54 23.65 23.65 559.3225 6.811832 6.811832
TOTALS 150.84 186.86 9032 40.3 52.31
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:
186.86
MAE = = 37.37
5
9032
MSE = = 1806
5
Graduation Project | BFT NIFT MUMBAI 2010-2014 41
52.31
MAPE = = 10.46
5
4.12) COMPARISON OF VARIOUS FORECASTING TECHNIQUES TO FIND OUT THE BEST LOGIC
FOR THE MIS
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 Naïve 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,
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:
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 men’s 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:
SUMMARY OF THE LINEAR TREND FORECASTS AND FORECAST ERRORS FOR THE MEN’s TIME
SERIES
Absolute Absolute
Squared
Actual Forecast Value Of Percentage Value of
Week Forecast Forecast
Sales Error Forecast Error Percentage
Error
Error Error
1 548.13 522.52 25.61 25.61 655.8721 4.672249 4.672249
2 546.85 557.67 -10.82 10.82 117.0724 1.978605 1.978605
3 551.58 592.82 -41.24 41.24 1700.738 7.476703 7.476703
4 603.63 627.97 -24.34 24.34 592.4356 4.032271 4.032271
5 660.83 663.12 -2.29 2.29 5.2441 0.346534 0.346534
6 715.42 698.27 17.15 17.15 294.1225 2.397193 2.397193
TOTALS 121.45 3365.48 20.9 20.9
The forecasts obtained using this method for the Men’s 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:
121.45
MAE = = 20.24
6
3365 .48
MSE = = 560.91
6
20.9
MAPE = = 3.48
6
To compute the linear trend equation for the men’s 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 Yt t-t^ Yt-Y^ (t-t^)(Yt-Y^) (t-t^)2
1 318.81 -2.5 -84.02 210.05 6.25
2 330.81 -1.5 -72.02 108.03 2.25
3 331.53 -0.5 -71.3 35.65 0.25
4 425.9 0.5 23.07 11.535 0.25
5 492.77 1.5 89.94 134.91 2.25
6 517.18 2.5 114.35 285.875 6.25
TOTALS 21 2417 786.05 17.5
Absolute Absolute
Squared
Actual Forecast Value Of Percentage Value of
Week Forecast Forecast
Sales Error Forecast Error Percentage
Error
Error Error
1 318.81 308.55 10.26 10.26 105.2676 3.218218 3.218218
2 330.81 353.46 -22.65 22.65 513.0225 6.846831 6.846831
3 331.53 398.37 -66.84 66.84 4467.586 20.16107 20.16107
4 425.9 443.28 -17.38 17.38 302.0644 4.08077 4.08077
5 492.77 488.19 4.58 4.58 20.9764 0.92944 0.92944
6 517.18 533.1 -15.92 15.92 253.4464 3.078232 3.078232
TOTALS 137.63 5662.36 38.31 38.31
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:
137.63
MAE = = 22.93
6
5662 .36
MSE = = 943.72
6
38.31
MAPE = = 6.38
6
To compute the linear trend equation for the men’s 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 Yt t-t^ Yt-Y^ (t-t^)(Yt-Y^) (t-t^)2
1 368.07 -2.5 -113.34 283.35 6.25
2 378.94 -1.5 -102.47 153.705 2.25
3 445.81 -0.5 -35.6 17.8 0.25
4 491.07 0.5 9.66 4.83 0.25
5 587.36 1.5 105.95 158.925 2.25
6 617.24 2.5 135.83 339.575 6.25
TOTALS 21 2888.49 958.15 17.5
Absolute Absolute
Squared
Actual Forecast Value Of Percentage Value of
Week Forecast Forecast
Sales Error Forecast Error Percentage
Error
Error Error
1 368.07 344.53 23.54 23.54 554.1316 6.395523 6.395523
2 378.94 399.28 -20.34 20.34 413.7156 5.367604 5.367604
3 445.81 454.03 -8.22 8.22 67.5684 1.843835 1.843835
4 491.07 508.78 -17.71 17.71 313.6441 3.60641 3.60641
5 587.36 563.53 23.83 23.83 567.8689 4.057137 4.057137
6 617.24 618.28 -1.04 1.04 1.0816 0.168492 0.168492
TOTALS 94.68 1918.01 21.43 21.43
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:
94.68
MAE = = 15.78
6
1918.01
MSE = = 319.66
6
21.43
MAPE = = 3.57
6
To compute the linear trend equation for the men’s 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 Yt t-t^ Yt-Y^ (t-t^)(Yt-Y^) (t-t^)2
1 129.4 -2.5 -49.7 124.25 6.25
2 128.4 -1.5 -50.7 76.05 2.25
3 147.78 -0.5 -31.32 15.66 0.25
4 200 0.5 20.9 10.45 0.25
5 218.41 1.5 39.31 58.965 2.25
6 250.61 2.5 71.51 178.775 6.25
TOTALS 21 179.1 464.15 17.5
Absolute Absolute
Squared
Actual Forecast Value Of Percentage Value of
Week Forecast Forecast
Sales Error Forecast Error Percentage
Error
Error Error
1 129.4 112.8 16.6 16.6 275.56 12.82844 12.82844
2 128.4 139.32 -10.92 10.92 119.2464 8.504673 8.504673
3 147.78 165.84 -18.06 18.06 326.1636 12.22087 12.22087
4 200 192.36 7.64 7.64 58.3696 3.82 3.82
5 218.41 218.88 -0.47 0.47 0.2209 0.215192 0.215192
6 250.61 245.4 5.21 5.21 27.1441 2.078927 2.078927
TOTALS 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:
59.9
MAE = = 9.98
6
806.7
MSE = = 134.45
6
39.66
MAPE = = 6.61
6
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.
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.
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.
ALL LTL
Great than 5% = Green
0-5% = Yellow
Less than 0% = RED
ALL ABP
Great than equal 100% = Green
90-100% = Yellow
Less than 90% = RED
ALL GM ACT%
If actual Great than budget = Green
IM LY% - No Color
IM ACT%
If actual Great than IM LY = Green
If actual is 95% of IM LY = Yellow
If actual is less than 95% of IM LY = RED
MD LY% - No Color
MD ACT%
If actual Less than MD LY = Green
If actual is 100 to 105% of MD LY = Yellow
If actual is greater than 105% of MD LY = RED
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 MC’s 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%.
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.
CLICK HERE
Clear these
2) BOM-Component-Quantity
3) COMPONENT-COLOR RELATION:
Table Code: sq01 Select Environment and under it select query areas and
then double click on standard area
RESULTS
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) Non Apps CATEGORY:
ACTUAL Earlier Sales Linear Forecasting Error Forecasti Error
SALES Forecasting Regression Error Earlier %age ng Error %age
Method of New
Sales
Forecasting
1 (17-23 FEB) 318.81 337.61 308.55 -18.8 -5.9 10.3 3.2
2 (24-2 MAR) 330.81 347.38 353.46 -16.6 -5 -22.7 -6.8
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.
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.
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.
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.
CONCLUSION
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.
REFRENCES
(Business Forecasting with Student CD [J. Holton Wilson, Barry Keating, Tata
McGrawHill)
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-sales-
forecasting/
http://blog.getbase.com/5-essential-sales-forecasting-techniques