Forecasting

Hazels forecast should be timely, reliable & it should work consistently so as to achieve this
Hazel has to use two approaches to forecasting, The first approach based on Judgment &
opinion, The second is based on Forecast based on Time series data. Both these approaches are
explained below in detail.

Basic steps in forecasting:

1) Purpose of forecasting: To figure out growth estimated in company operations. The

forecast in sales will give us details about required additional manpower, machinery &
infrastructure.

2) Time Horizon: The company is new(just 1 year old), and the forecast is over the next 1
year.

3) Forecasting tools : a) Judgmental basis : The company is new and does not have sales
data over the last couple of years. Hence we have no/very limited data for past
performance analysis. Also the basic start of the company was by getting customers on
goodwill through personal contact of Hazel. Hence at least for the first few years; unless
Hazel turn her home business into a professional mowing service, her methods to get
customers will be through word of mouth publicity. Even if she starts advertising her
company services in any mass media and gets some response; the quantum of the
response would be hard to estimate. But she can always consider whether her present
capacity can accommodate adding the new customer or not. Thus it will be on the
judgment of Hazel to determine how much sales she can make out of the available
customers.

b) Seasonal variation: The growth of her form will show a trend of growth since it is a
new firm and customers are just adding in. And also there will be seasonal trend due to
the type of the business (Lawn mowing)

4) Gather data: We have data of the past available as shown in Table 1. Below.

5) Make forecast. See below.

6) Monitor forecast. Hazel will monitor the forecast and compare it against the actual sales.
Based on the performance the she will be better equipped to adapt to the performance of
future forecasts of forthcoming intervals.
1. Forecast based on Judgment & opinion:

Hazel already has two part time assistants with her she could employ them for a week to conduct
consumer surveys. The main reason behind doing this is finally consumers would determine the
demand for Hazel’s primary business of mowing lawns along with value added services like
fertilizing lawns ,weeding gardens & Trimming shrubbery.

Hazel should instruct them to do detail existing customer as well as potential customer surveys
and by doing so she could sense the voice of the customers i.e. know the opinions of the
customers & also know their expectations & demands, based on the voice of the customers she
could forecast the requirement of the raw materials required for moving the lawns as well as the
materials required for fertilizing lawns ,weeding gardens & Trimming shrubbery i.e. Amount of
Man power required ,Fertilizers ,weedicides, grass trimmer machines ,sickles etc could be
forecasted based on this known requirement from customers. This survey should be done once
six months so that the continuity is there in tracing the requirement as well the feedback of past
work can be taken; the scope for further improvement is also known by doing this survey along
with the forecasting data.

The opinions of Hazels two part time assistants will also be considered for the matter of fact that
they are in direct contact with the customers, they can convey the known demand of the
customers & what they expect based on their experience with customers.

2. Forecast based on Time series data:

Time series is a time ordered sequence of observations taken at regular intervals. Forecasting
based on time series data are based on the assumptions that future values can be estimated from
past values. Since the business of hazel is seasonal in nature therefore this seasonality has to be
taken into consideration while forecasting. Since seasonality refers to regular annual variations
The demand for Lawnmowers is also subject to seasonal fluctuations.

Consider the following table showing the demands for Mowing lawns from Hazel quarter wise.

We have historical data for the last year showing that the demand rose in Q2 &Q3 because of
various factors like Rain in this season also on account of Climatic conditions the demand is less
in Q1 &Q4 on account of winter.
Table 1: Last years Demand Chart.

Months No of Lawns Mowed Total area of lawns

2007 Mowed (in Sq Mts)

Jan-Mar–Q1 5 50

Apr-Jun-Q2 7 70

Jul-Sept-Q3 7 70

Oct-Dec-Q4 5 50

Now we can see that the average area of lawns mowed is

(50+70+70+50)/4 = 240/4=60 Sq Mts

Here we consider the multiplicative model of model of seasonality wherein the seasonality is
expressed as the percentage of the average amount.

Now computing the same we get for Q1 = 50/60=0.833

Now computing the same we get for Q2 = 70/60=1.166

Now computing the same we get for Q3 = 70/60=1.166

Now computing the same we get for Q4 = 50/60=0.833

Hence we can deduce that the Mowing business is 16.7% lower than (below) the seasonal
average for Q1 & Q4

Similarly we can infer that the Mowing business is 16 .66% Higher than (Above) the seasonal
average for Q2 & Q3.

Similarly using this past data will help us in forecasting the present (This years) requirements,
suppose Hazel knows by using customer surveys & by using sales force estimates that this year
the average demand will be approximately per Quarter then we can deduce that in Q1 & Q4 the
demand will be more or less likely to be 8 lawns and we can predict the demand for Q2 & Q3
will be approximately 17 Lawns so now based on this she could keep the different raw materials
ready as well as the manpower needed to cater this much demand can be arranged.