ON

Sales Forcast of KLG Systel

Submitted by:
Aditi Goel (05)
Arjun Malhotra (17)
Ashneet (20)
Chandani Kripalani (25)
Prince Arora(47)
Vinay Ajmera(62)
 About KLG Systel

When India emerged on the global scene as a strong economy, the IT industry played
a major role in its development, by putting India on the global IT map. Most Indian IT
companies grew by providing outsourced solutions to companies in need of their
services overseas and opened up spaces in the global economy. A few IT companies
also took the pioneering path of nurturing the IT initiative on the home ground. Out of
the limelight, but growing stronger, nevertheless, these niche players emerged in the
areas of providing solutions to Indian Public and Private sector companies. They have
spent the last couple of years in acquiring domain knowledge, IPR development,
marketing and distribution, as well as being the enablers for the growth of Indian
Private and Public Sector Companies.

KLG Systel is one such company that has been an enabler in the burgeoning growth
of Indian Industry and Infrastructure, providing support and IT enablement to Top
500 Indian companies (both from the government & private sector) and the Indian
arms of Fortune 500 companies.

KLG Systel started with a vision of being a 'Knowledge Company' right from
inception. The company drives growth and development of the Indian economy, by
providing solutions for IT enablement to organisations in the areas of Oil and Gas,
Manufacturing, Retail, Infrastructure, Power, Process, and new economy industries
such as Information Technology, Telecommunications and the service sector.
Project objective

Our project objective was to forecast quarterly sales for the year 2008-2009.

Methodology

1) Collected data
2) Analysed trend and seasonality in past data
3) Application of suitable models on the basis of our analysis

Data analysis

Sales (in
Years Quarters crores)
2002 I 521.63
  II 705.74
  III 689.3
  IV 725.17
2003 I 724.82
  II 741.31
  III 1125.19
  IV 1295.56
2004 I 872.64
  II 806.36
  III 1015.03
  IV 1109.91
2005 I 1192.99
  II 1206.13
  III 1251.98
  IV 1586.14
2006 I 1841.86
  II 2378.47
  III 4169.24
  IV 3908.15
2007 I 4357.94
  II 5749.21
  III 9257.59
  IV 7768.46
2008 I 5806.89
Trend analysis

10000

9000

8000

7000

6000

5000 Series1

4000

3000

2000

1000

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Now we can clearly see that the sales data is following a trend over the years but no
seasonality.
As the data have only treand but not the seasonality we can apply the following
statistical models –
1) Naïve Method
2) Moving Average method
3) HOLT’s model

Now using these models we have forecasted sales figure for the next for quarters.
NAÏVE METHOD

We have used data of first 20 quarters for initialization and the data for next 5 quarter
for checking the error through ex-post forecast.

forcasted
year quarter t sales sales error  
2002 I 1 521.63      
  II 2 705.74      
  III 3 689.3      
  IV 4 725.17      
2003 I 5 724.82      
  II 6 741.31      
  III 7 1125.2      
  IV 8 1295.6      
2004 I 9 872.64      
  II 10 806.36      
  III 11 1015      
  IV 12 1109.9      
2005 I 13 1193      
  II 14 1206.1      
  III 15 1252      
  IV 16 1586.1      
2006 I 17 1841.9      
  II 18 2378.5      
  III 19 4169.2      
  IV 20 3908.2      
Ex-Post
2007 I 21
4357.9 3647.06 710.88 forecast
Ex-Post
  II 22
5749.2 4807.73 941.48 forecast
Ex-Post
  III 23
9257.6 7140.48 2117.11 forecast
- Ex-Post
  IV 24
7768.5 12765.97 4997.51 forecast
Ex-Post
2008 I 25
5806.9 6279.33 -472.44 forecast
  II     3845.32   Forecasted

To forecast we have used following formulae

y^(21) = y(20) + [y(20) -y(19)]
y^(21) = 3908.2 + (3908.2-4169.2)
y^(21)= 3647.06

MOVING AVRERAGE METHOD

 First we are forecasting using 3 quarters moving average

d d2
forcast (=sales- d1 (=d/sales d3
Year quarter sales (F3) F3) (=IdI) *100) (=Id2I) d4 (=d*d)
2002 I 521.63            
  II 705.74            
  III 689.30            
  IV 725.17 638.89 86.28 86.28 13.50 13.50 7444.24
2003 I 724.82 706.74 18.08 18.08 2.56 2.56 327.01
  II 741.31 713.10 28.21 28.21 3.96 3.96 795.99
  III 1125.19 730.43 394.76 394.76 54.04 54.04 155832.83
  IV 1295.56 863.77 431.79 431.79 49.99 49.99 186439.73
2004 I 872.64 1054.02 -181.38 181.38 -17.21 17.21 32898.70
  II 806.36 1097.80 -291.44 291.44 -26.55 26.55 84935.33
  III 1015.03 991.52 23.51 23.51 2.37 2.37 552.72
  IV 1109.91 898.01 211.90 211.90 23.60 23.60 44901.61
2005 I 1192.99 977.10 215.89 215.89 22.09 22.09 46608.49
  II 1206.13 1105.98 100.15 100.15 9.06 9.06 10030.69
  III 1251.98 1169.68 82.30 82.30 7.04 7.04 6773.84
  IV 1586.14 1217.03 369.11 369.11 30.33 30.33 136239.73
2006 I 1841.86 1348.08 493.78 493.78 36.63 36.63 243815.40
  II 2378.47 1559.99 818.48 818.48 52.47 52.47 669904.05
  III 4169.24 1935.49 2233.75 2233.75 115.41 115.41 4989639.06
  IV 3908.15 2796.52 1111.63 1111.63 39.75 39.75 1235713.85
2007 I 4357.94 3485.29 872.65 872.65 25.04 25.04 761523.84
  II 5749.21 4145.11 1604.10 1604.10 38.70 38.70 2573136.81
  III 9257.59 4671.77 4585.82 4585.82 98.16 98.16 21029775.64
  IV 7768.46 6454.91 1313.55 1313.55 20.35 20.35 1725404.85
-
2008 I 5806.89 7591.75 1784.86 1784.86 -23.51 23.51 3185737.12
  II   7610.98       MSE 1687655.98

Forecast using 5 quarter moving average

 d d2
forcast (=sales- d1 (=d/sales d3
Year quarter sales (F5) F5) (=IdI) *100) (=Id2I) d4 (=d*d)
2002 I 521.63            
  II 705.74            
  III 689.3            
  IV 725.17            
2003 I 724.82            
  II 741.31 673.332 67.978 67.978 9.169983 9.169983 4621.008484
  III 1125.2 717.268 407.922 407.922 36.25361 36.25361 166400.3581
  IV 1295.6 801.158 494.402 494.402 38.16126 38.16126 244433.3376
-
2004 I 872.64 922.41 -49.77 49.77 5.703383 5.703383 2477.0529
-
  II 806.36 951.904 -145.544 145.544 18.04951 18.04951 21183.05594
  III 1015 968.212 46.818 46.818 4.612475 4.612475 2191.925124
  IV 1109.9 1022.956 86.954 86.954 7.834329 7.834329 7560.998116
2005 I 1193 1019.9 173.09 173.09 14.50892 14.50892 29960.1481
  II 1206.1 999.386 206.744 206.744 17.1411 17.1411 42743.08154
  III 1252 1066.084 185.896 185.896 14.84816 14.84816 34557.32282
  IV 1586.1 1155.208 430.932 430.932 27.1686 27.1686 185702.3886
2006 I 1841.9 1269.43 572.43 572.43 31.07891 31.07891 327676.1049
  II 2378.5 1415.82 962.65 962.65 40.4735 40.4735 926695.0225
  III 4169.2 1652.916 2516.324 2516.32 60.3545 60.3545 6331886.473
  IV 3908.2 2245.538 1662.612 1662.61 42.54217 42.54217 2764278.663
2007 I 4357.9 2776.772 1581.168 1581.17 36.28246 36.28246 2500092.244
  II 5749.2 3331.132 2418.078 2418.08 42.05931 42.05931 5847101.214
  III 9257.6 4112.602 5144.988 5144.99 55.57589 55.57589 26470901.52
  IV 7768.5 5488.426 2280.034 2280.03 29.34988 29.34988 5198555.041
-
2008 I
5806.9 6208.27 -401.38 401.38 6.912134 6.912134 161105.9044
  II   6588.018       MSE 2563506.143

Now since MSE (Mean Square Error) for 3 quarter moving average is less than that of
5 quarter moving average. We will use 3 quarter moving average for forecasting sales.

HOLT’s Method

We have minimized the values of alpha and beta using SOLVER Function in excel
sheet.

Alpha = 0.999
Beta = 0.010

year quarter sales Lt Tt forcasted error error^2

2002 I 521.63 521.63 184.11 521.63 0 0
  II 705.74 705.74 184.11 705.74 0 0
  III 689.3 689.5006 182.1065 889.85 -200.55 40220.3
  IV 725.17 725.3164 180.6436 871.6071 -146.437 21443.81
2003 I 724.82 725.0011 178.834 905.96 -181.14 32811.71
  II 741.31 741.4725 177.2104 903.8352 -162.525 26414.42
  III 1125.2 1124.983 179.2734 918.6829 206.5071 42645.18
  IV 1295.6 1295.569 179.1865 1304.257 -8.69688 75.63577
2004 I 872.64 873.2421 173.1714 1474.755 -602.115 362542.7
  II 806.36 806.6001 170.7732 1046.413 -240.053 57625.68
  III 1015 1014.992 171.1494 977.3733 37.6567 1418.027
  IV 1109.9 1109.986 170.3879 1186.142 -76.2318 5811.284
2005 I 1193 1193.077 169.5149 1280.374 -87.3841 7635.983
  II 1206.1 1206.286 167.9519 1362.592 -156.462 24480.45
  III 1252 1252.102 166.7305 1374.238 -122.258 14947.1
  IV 1586.1 1585.973 168.4019 1418.833 167.3073 27991.72
2006 I 1841.9 1841.773 169.2759 1754.375 87.48542 7653.698
  II 2378.5 2378.103 172.9464 2011.048 367.4216 134998.6
  III 4169.2 4167.622 189.1121 2551.049 1618.191 2618542
  IV 3908.2 3908.599 184.6308 4356.734 -448.584 201227.6
2007 I 4357.9 4357.675 187.2752 4093.229 264.7106 70071.72
  II 5749.2 5748.006 199.3058 4544.951 1204.259 1450241
  III 9257.6 9254.28 232.3755 5947.312 3310.278 10957943
  IV 7768.5 7770.178 215.2107 9486.655 -1718.2 2952195
2008 I 5806.9 5809.068 193.4475 7985.389 -2178.5 4745857
  II       6002.516    
  III       6195.964 MSE 952191.8
  IV       6389.411    
2009 I       6582.859    
  II       6776.306    
  III       6969.754    
  IV       7163.201    

SUMMARY

Forecast using different models (all figures in Crores)

Moving Moving
Average Average
year Quarter Naïve (3) (5) HOLTS
2008 II 3845.32 7610.98 6588.018 6002.516
  III       6195.964
  IV       6389.411
2009 I       6582.859
  II       6776.306
  III       6969.754
  IV       7163.201