Assignment-1

Using Forecasting Techniques on “MEEK SWEATER & FASHIONS LTD”

OPM 501

Submitted To

Dr. A. K. M. Masud

Adjunct Faculty

Masters of Business Administration

East West University

Submitted By

Name ID
Sayed Ibne Mannan 2023-1-95-021
Sayda Sultana 2023-1-95-020
Manisha Ghosh 2023-2-95-017

Date of Submission

May 07 , 2024
Table of Contents
Acknowledgment ........................................................................................................................................... 5
Executive Summary ........................................................................................................................................ 6
Chapter-1 Introduction .................................................................................................................................. 7
1.1 Background of the study ................................................................................................................ 7
1.2 The objective of the study ............................................................................................................. 7
1.3 Methodology ................................................................................................................................. 7
1.4 Limitations ..................................................................................................................................... 7
Chapter- 2 Company Profile ........................................................................................................................... 7
2.1 Introduction ......................................................................................................................................... 7
2.2 Details of Manufacturing Units ............................................................................................................ 7
2.3 Nature of Business ............................................................................................................................... 8
2.4 Mission ................................................................................................................................................. 8
2.5 Ethical & Socially Responsibility .......................................................................................................... 8
Chapter 3 Overview of Forecasting................................................................................................................ 8
3.1 Definition ............................................................................................................................................. 8
3.2 Types of Forecasting ............................................................................................................................ 9
3.3 Quantitative Forecasting (Time Series) ................................................................................................ 9
3.3.1 Simple Moving Average: .................................................................................................................10
3.3.2 Weighted Moving Average:.............................................................................................................10
3.3.3 Exponential Smoothing: ..................................................................................................................10
3.3.4 Simple Linear Regression Model:....................................................................................................11
3.3.5 Mean Absolute Deviation (MAD): ...................................................................................................11
Chapter-4 Sales Forecast of sweater............................................................................................................12
4.1 Sales Forecasts of sweater for the last 12 months ............................................................................12
Chapter-5 Forecasting ..................................................................................................................................13
5.1 Simple Moving Average .....................................................................................................................13
5.2 Weighted Moving Average:................................................................................................................14
5.3 Exponential Smoothing: .....................................................................................................................15
5.4 Simple Linear Regression ...................................................................................................................16
Conclusion ....................................................................................................................................................17
Recommendation.........................................................................................................................................17
Letter of Transmittal

April 30, 2024

Dr. A. K. M. Masud
Professor
Dept. of Industrial & Production Engineering
Bangladesh University of Engineering & Technology (BUET)
Adjunct Faculty (Dept. of Master of Business Administration)
East West University.

Subject: Submission of term paper on “Using Forecasting Technique on MEEK SWEATER & FASHIONS LTD.”

Dear Sir,

Here is the term paper on “Using Forecasting Technique on MEEK SWEATER & FASHIONS LTD” that you
assigned us to do in the previous month. We would like to thank you for giving us this unique opportunity
to further enhance our knowledge of this particular report writing. We sincerely hope that we will be able
to fulfill your expectations and do justice in capturing the true essence of your teachings in our paper. This
paper has been extremely interesting to work on as it has allowed us to have a detailed perception of how
people use food ordering apps based on their age.

We have done this report writing with our utmost sincerity and hope that you will appreciate this
endeavor.

Sincerely,

1. Sayed Ibne Mannan

2. Sayda Sultana

3. Manisha Ghosh
Acknowledgment
The completion of our OPM 501 assignment was a result of considerable effort and the invaluable
assistance we received from various individuals. We extend our sincere gratitude to Dr. A.K.M. Masud, our
course instructor, whose tips, suggestions, and encouragement guided us throughout the report analysis.
His teachings have equipped us with valuable knowledge that will undoubtedly benefit our future
endeavors. We also extend our appreciation to our friends and respondents who generously provided
support and valuable information on business communication. Collaborative efforts and the support of
others have been instrumental in our success, and we are grateful for their contributions.
Executive Summary
The objective of the report is to identify the most effective forecasting method for predicting demand or
sales of a specific company's product. To facilitate the analysis, a group focused on manufacturing was
formed. The report compares sales forecasts for MEEK SWEATER & FASHIONS LTD using four forecasting
methods: Linear Forecast, Simple Moving Average, Weighted Moving Average, and Exponential
Smoothing. Data was primarily sourced from primary sources, along with monthly sales reports of MEEK
SWEATER & FASHIONS LTD. Forecasting operations utilized sales data from MEEK SWEATER & FASHIONS
LTD spanning from July 2022 to June 2023. Mean Absolute Deviation (MAD) was calculated for each
forecasting method to determine the most suitable approach. For the exponential method, sales forecasts
were generated for three alpha values, and two trials with different weights were conducted for the three-
month weighted moving average to ascertain the forecast closest to actual sales. Through the analysis, it
was concluded that the Linear Regression Method is the most effective for forecasting MEEK SWEATER &
FASHIONS LTD sales, based on the MAD calculations from each method and the graphical representation
of forecasted figures, as it yielded the lowest MAD.
Chapter-1 Introduction
1.1 Background of the study
Operation management is a crucial system or process responsible for creating goods and providing
services. It encompasses various tasks, among which forecasting plays a significant role. Forecasting
involves using historical data to predict future trends. This report is prepared as part of the operation
management course, focusing on MEEK SWEATER & FASHIONS LTD. Specifically, we have prepared a
forecasting report for their product "zipper and button" based on their 12 months' demand.

1.2 The objective of the study

The main objective of this study is to determine the most effective forecasting method for predicting future
demand for the products.

1.3 Methodology
The sales demand data for the 12 months of zipper and button products were collected internally from
the company. Other relevant data were sourced primarily from secondary sources such as books, websites,
articles, and journals.

1.4 Limitations
The study is subject to certain limitations, including:

• Insufficient information availability.

• Time constraints.
• Confidentiality constraints imposed by the organization.

Chapter- 2 Company Profile

2.1 Introduction
In the bustling landscape of Bangladesh's garment industry, where innovation and quality reign supreme,
MEEK SWEATER & FASHIONS LTD. and MEEK SWEATER LTD. stand out as beacons of excellence.
Established in 2009, Meek Sweater Ltd. embarked on a journey marked by dedication, craftsmanship,
and a commitment to delivering superior knitwear products. Over the years, the company's unwavering
pursuit of perfection led to the inception of Meek Sweater & Fashions Ltd. in 2017, further solidifying its
position as a leading player in the global knitwear market.

2.2 Details of Manufacturing Units

Located strategically in Gazipur, a mere stone's throw away from Dhaka International Airport, MEEK
SWEATER & FASHIONS LTD. and MEEK SWEATER LTD. boast state-of-the-art facilities housed within newly
constructed buildings. The sprawling production floors, spanning over 160,000 square feet for MEEK
SWEATER & FASHIONS LTD. and 62,500 square feet for MEEK SWEATER LTD., are meticulously designed to
accommodate advanced jacquard and knitting machines of varying gauges. This cutting-edge
infrastructure enables the companies to achieve an impressive annual production capacity of
approximately 6,840,000 pieces, catering to the diverse needs of their clientele.
2.3 Nature of Business
The main products of this company are all kinds of sweater like pullover, cardigan, vest, lingerie and others
for Men, Women and Children. Our first priority is to deliver the best quality product in time. Both of our
factories are socially compliant Factory.

2.4 Mission
In addition to their steadfast focus on product quality, MEEK SWEATER & FASHIONS LTD. and MEEK
SWEATER LTD. place a strong emphasis on timeliness and customer satisfaction. Their agile manufacturing
processes and efficient supply chain management enable them to meet tight deadlines and accommodate
bespoke requirements with ease. Whether it's a bulk order for a major retail chain or a custom design for
a boutique brand, the companies pride themselves on delivering superior products promptly and reliably.
Looking ahead, MEEK SWEATER & FASHIONS LTD. and MEEK SWEATER LTD. are poised to continue their
trajectory of growth and innovation in the knitwear industry. With a steadfast commitment to excellence,
ethical business practices, and customer satisfaction, they remain at the forefront of Bangladesh's garment
manufacturing sector. As they forge ahead into the future, these companies serve as shining examples of
how dedication, craftsmanship, and integrity can elevate an industry to new heights.

2.5 Ethical & Socially Responsibility

what truly sets these companies apart is their unwavering dedication to ethical and socially responsible
business practices. Both factories adhere strictly to the Bangladesh Labor Code 2006 and the International
Labor Organization's (ILO) Code of Conduct, ensuring the welfare and rights of their workforce. Moreover,
they maintain active compliance status with esteemed auditing bodies such as ACCORD, BSCI, SEDEX, and
ICS, earning recognition as approved vendors for renowned retailers worldwide.

Chapter 3 Overview of Forecasting

3.1 Definition

The process of forecasting involves using historical data as a basis for making educated assumptions
regarding the course of future trends. Businesses use forecasting to decide how to spend their budgets
and make plans for forthcoming costs. Typically, this is based on the

anticipated demand for the provided goods and services. Forecasting is a tool used by investors to predict
if certain events, such as sales projections, would raise or lower the price of a company's stock. For
businesses that require a long-term view of operations, forecasting also offers an essential benchmark.
Organizations use forecasting methods to predict business outcomes. Forecasts generate estimations that
can aid in the development and application of production strategy by managers. The procedures that
produce the finished product are under the control of the operations manager. Planning for sales and
demand, as well as budgeting, all employ these estimates. They assist in making decisions and preparing
for potential

scenarios.

The method of forecasting will vary according to available data and industry size and respective goals.
Forecasts are developed using both qualitative and quantitative data. They can help form educated
forecasts, but they are not always reliable, so they need to be utilized carefully.
3.2 Types of Forecasting

There are 2 types of forecasting. They are:

• Qualitative Forecasting

• Quantitative Forecasting

In our report, we will only work with the quantitative forecasting method.

3.3 Quantitative Forecasting (Time Series)

Quantitative forecasting is a data-driven mathematical approach used by sales teams to analyze

performance and project future revenue based on past data and patterns. Businesses may make

educated judgments about strategies and procedures to ensure ongoing success by forecasting results.
Quantitative forecasting differs from qualitative forecasting in that it is objective and based on statistics
and arithmetic, whereas qualitative forecasting is subjective and relies on expert knowledge and views.

To anticipate the future, time series forecasts make use of previous data. Data is information that relates
to a certain time, for as monthly inputs throughout ten years. These data sources are used to produce
long-term projections, which rely on the presumption that historical trends will continue in the future.
Typically, this approach is applied to short-term forecasts. It is objective in character

and based on mathematical models.

Some examples of quantitative forecasting methods are-

❖ Simple moving averages

❖ Weighted moving averages

❖ Exponential smoothing

❖ Simple Linear Regression Model

Quantitative forecasting models are often judged against each other by comparing their accuracy
performance measures. Some of these measures include Mean Absolute Deviation (MAD).
3.3.1 Simple Moving Average:

A simple moving average reduces volatility and makes it simpler to see a security's price trend. If the simple
moving average is rising, the price of the asset is rising. If it is heading downward, the price of security is
falling. The smoother the simple moving average, the longer the time for the moving average. Though
more volatile, a shorter-term moving average's reading is more in line with the original data.

In this method, we take the average of the last “n” periods and use that as the forecast for the next period.
The value of “n” can be defined by the management to achieve a more accurate forecast. For example, a
manager may decide to use the demand values from the last five periods (i.e.,n = 5) to calculate the 5-
period moving average forecast for the next period.

Some relevant notations:

At = Actual demand observed in period t

Ft = Forecast for period t

Formula:

𝐹𝑡 = 𝐴𝑡1+𝐴𝑡2+𝐴𝑡3+....+𝐴𝑡𝑛

3.3.2 Weighted Moving Average:

A technical indicator called the weighted moving average (WMA) gives more weight to current data points
and less weight to data points from the distant past. Each number in the data set is multiplied by a
predefined weight before being added together to get the WMA. This method is the same as the simple
moving average with the addition of a weight for each one of the last “n” periods. In practice, these
weights need to be determined in a way to produce the most accurate forecast. Let’s have a look at the
same example, but this time, with weights.

Formula:

𝐹𝑡= 𝑊1𝐴𝑡1 + 𝑊2𝐴𝑡2 + 𝑊3𝐴𝑡3+. . . . +𝑊𝑛𝐴𝑡

3.3.3 Exponential Smoothing:

Exponential smoothing is a relatively reliable approach for smoothing time series data using the
exponential window function. The smoothing constant or factor is known as the controlling input of the
exponential smoothing computation. To assign weights that decrease exponentially over time, exponential
functions are utilized. It is a simple strategy that can be quickly learned and used to make decisions based
on the user's preconceived notions, such as seasonality. Time-series data analysis often employs
exponential smoothing.
This method uses a combination of the last actual demand and the last forecast to produce the forecast
for the next period. There are many advantages to using this method. It can often result in a more accurate
forecast. It is an easy method that enables forecasts to quickly react to new trends or changes.

A benefit to exponential smoothing is that it does not require a large amount of historical data. Exponential
smoothing requires the use of a smoothing coefficient called Alpha (α). The Alpha that is chosen will
determine how quickly the forecast responds to changes in demand. It is also referred to as the Smoothing
Factor.

Formula:

Ft = Ft-1 + α (Dt-1 – Ft-1)

3.3.4 Simple Linear Regression Model:

A simple linear regression model depicts the connection between the independent and dependent
variables as a straight line. Simple linear regression is a regression model that estimates the relationship
between one independent variable and one dependent variable using a straight line. Both variables should
be quantitative. Two objectives are served by a simple linear regression model:

➢ It may predict the values of one variable from the values of another based on the historical connection
between the independent and dependent variables.

➢ It describes the linear dependency of one variable on another.

The regression equation is written as, Yt = a + bx

Y is the value of the Dependent variable (Y), which is being predicted or explained. a or Alpha, a constant;
equals the value of Y when the value of X=0. b or Beta, the coefficient of X; the slope of the regression
line; how much Y changes for each one-unit change in.

3.3.5 Mean Absolute Deviation (MAD):

MAD stands for mean absolute deviation, which is the average of the absolute deviations. An absolute
deviation is the absolute value of the actual data minus the fitted value. The best-fitted line should have
zero MAD, the larger the MAD, the worse the model.

Formula:

MAD= ∑∣𝐴𝑡−𝐹𝑡∣/𝑛

1 MAD = 0.8 Standard deviation and 1 Standard Deviation = 1.25 MAD

Chapter-4 Sales Forecast of sweater
4.1 Sales Forecasts of sweater for the last 12 months

Month Unit Sales (

000)
July 438 Sales Demand
August 570
September 506
700
October 425
November 403
600
December 378
January 170 500
February 295
March 356 400
April 481
300
May 551
June 622
200

100

0
1 2 3 4 5 6 7 8 9 10 11 12

Month Sales demand

Chapter-5 Forecasting
5.1 Simple Moving Average

3 5
Unit
months Absolute months Absolute
Months (x) Sales in
moving Error moving Error
000
average average
July 1 438
August 2 570
September 3 506
October 4 425 505 79
November 5 403 501 98
December 6 378 445 67 469 91
January 7 170 402 232 456 287
February 8 295 317 22 376 82
March 9 356 281 75 334 22
April 10 481 273 208 320 161
May 11 551 377 174 336 215
June 12 622 463 159 370 252

Sum error 1115 1109

MAD 92.92 92.44

5.2 Weighted Moving Average:

Weight
W-1
0.3
0.3
0.4

W-1
Unit Absolute
0.3,
Months (x) Sales in Error
0.3,0.4
000 W-1
July 1 438
August 2 570
September 3 506
October 4 425 498.11 72.62
November 5 403 507.53 104.57
December 6 378 451.04 73.49
January 7 170 404.35 234.66
February 8 295 325.35 30.79
March 9 356 290.30 65.52
April 10 481 262.99 218.44
May 11 551 369.00 181.82
June 12 622 452.00 170.11

Sum error 1152.02

MAD 96.00
5.3 Exponential Smoothing:

Exponential Smoothing
Months (x) Sales in 000 Absolute Absolute
(α=0.7) (α=0.3)
Error Error
July 1 438 438
August 2 570 438
September 3 506 530.412 24.1342 477.6435 28.63425
October 4 425 513.518 88.02987 523.1717 97.68355
November 5 403 451.8971 48.94556 487.1091 84.15751
December 6 378 417.6352 40.07957 437.2135 59.6578
January 7 170 389.5795 219.8941 405.6114 235.9259
February 8 295 235.6537 58.90718 323.6113 29.05045
March 9 356 276.8887 78.92521 253.3258 102.4881
April 10 481 332.1364 149.2925 300.5663 180.8626
May 11 551 436.6411 114.1776 376.9241 173.8946
June 12 622 516.5654 105.542 470.8944 151.213

sum error 927.9278 1143.568

MAD 77.32731 95.29731

5.4 Simple Linear Regression

Months X y xy x^2 Forcust Error

-
July 1 438 438 1 13853.32 14291.32
-
August 2 570 1140 4 11255.82 11825.82
September 3 506 1518 9 -8658.32 9164.32
October 4 425 1700 16 -6060.82 6485.82
November 5 403 2015 25 -3463.32 3866.32
December 6 378 2268 36 -865.82 1243.82
January 7 170 1190 49 1731.68 1561.68
February 8 295 2360 64 4329.18 4034.18
March 9 356 3204 81 6926.68 6570.68
April 10 481 4810 100 9524.18 9043.18
May 11 551 6061 121 12121.68 11570.68
June 12 622 7464 144 14719.18 14097.18
0
sum 78 5195 405210 650 93755

X y
Average 6.5 432.9167 MAD 7812.9167

Y = a + bX
b 2597.5
a (-16450.834)
Which forecast is best for MEEK SWEATER & FASHIONS LTD

In this report, we forecast the sales of MEEK SWEATER & FASHIONS LTD. by using four different methods.
The methods are- Simple Moving Average, Weighted Moving Average, Exponential Smoothing and Linear
Regression. We also calculated error of sales forecast and MAD of sales forecast. After calculating the MAD
of all method, we found that Simple moving average is best method for forecast sales data of MEEK
SWEATER & FASHIONS LTD. Because MAD of Simple Moving Average method is the lowest among all other
method for this sales data. So, we suggest them to use simple moving average for forecast sales data, for
getting more accurate sales forecast.

Conclusion

Forecasting is a technique that uses historical data as inputs to make informed estimates that are
predictive in determining the direction of future trends. Businesses utilize forecasting to determine how
to allocate their budgets or plan for anticipated expenses for an upcoming period. But it is important to
know that Forecasting has its limitations as well. Different Forecasting methods adopted by different firms’
changes the visible health and profit levels for either better or worse. Different analysts may get different
results from the same information. Hence, we must conclude that forecasting methods are one of the
tools (although a major one) while taking a decision.

Recommendation

In this report, we forecast the sales of MEEK SWEATER & FASHIONS LTD. by using four different methods.
The methods are - Simple Moving Average, Weighted Moving Average,

Exponential Smoothing and Linear Regression. We also calculated error of sales forecast and MAD of sales
forecast. After calculating the MAD of all method, we found that Simple Moving Average is best method
for forecast sales data of MEEK SWEATER & FASHIONS LTD. Because MAD of Simple Moving Average
method is the lowest among all other method for this sales data and there is very less errors between the
actual sale and forecasted amount. So, we suggest them to use Simple Moving Average for forecast sales
data, for getting more accurate and reliable sales forecast.