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Graduation Project Submitted in Partial Fulfillment of the

Requirements

for the degree of

Bachelor of Fashion Technology (B.F.TECH)

BY

ANKIT GHOSH

M/BFT/10/05

Under the guidance of

Mr. Ranjan Kumar Saha

Department of fashion technology

NIFT, Mumbai

(2010-14)

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)

3.1)

MANUAL SALES FORECASTING .18

3.2)

DATA COLLECTION .18

3.3)

PLANNING SALES GOALS 19

3.4)

BEGINNING OF MONTH INVENTORY .23

3.5)

END OF MONTH INVENTORY ..23

4)

4.1)

PHASE I OF MIS AUTOMATION (BUILDING A SALES FORECASTING

TECHNIQUE FOR MIS) ..26

4.2)

FORECASTING TECHNIQUES 26

4.3)

TIME SERIES-PLOT ..27

Graduation Project | BFT NIFT MUMBAI 2010-2014

4.4)

4.5)

4.6)

4.7)

SELECTING A FORECASTING METHOD ..31

FORECAST ACCURACY 31

NAVE METHOD OF SALES FORECASTING 31

4.8)

4.9)

4.10)

4.11)

4.12)

MOVING AVERAGES AND EXPONENTIAL SMOOTHNING 35

MOVING AVERAGES . 36

EXPONENTIAL SMOOTHNING 38

COMPARISON OF VARIOUS FORECASTING TECHNIQUES TO FIND

OUT THE BEST LOGIC FOR THE MIS . .41

TREND PATTERN OF SALES FORECASTING. 41

LINEAR TREND REGRESSION FOR MENs CATEGORY . 41

LINEAR REGRESSION FOR SALES FORECASTING FOR NON APPS ...44

LINEAR REGRESSION FOR SALES FORECASTING FOR WOMEN WESTERN 46

LINEAR REGRESSION FOR SALES FORECASTING FOR KIDS CATEGORY .. 48

PHASE II OF THE MIS AUTOMATION . 50

DESIGNING THE LAYOUT OF THE MIS SALES REPORT .. 52

BUILDING THE LOGICS FOR THE CALCULATED FIELDS

IN THE MIS REPORT .53

COLOR CODE LOGIC . 54

MIS SALES REPORT 55

PHASE III OF THE MIS AUTOMATION ..57

DESIGNING THE LAYOUT FOR PHASE III .67

LOGICS FOR MIS AUTOMATION PHASE III 68

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)

STUDY)

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)

Merchandise Planning: To set up sales goals and inventory control system.

Assortment Planning: To decide quantity and quality of specific items.

Buying: Actual buying and rearrangement of the previous plans with vendors. (Done by

the retail Buyers)

1.7) MERCHANDISE PLANNING

PLANNING SALES GOALS:

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

The merchandise plan regulates inventory levels in accordance with planned financial

objectives. As with all merchandising activities, the essential goal of the merchandise plan is to

minimize the use of capital and maximize profits. Key purposes of the merchandise plan are as

follows:

a specific period.

To provide an estimate of planned sales for the period that translates into cash flow

estimates for store management and accounting personnel.

Graduation Project | BFT NIFT MUMBAI 2010-2014

10

The next step in planning process is to determine the amount of stock required to meet the

customer demand. Volume of stock is calculated relative to desired sales and inventory turn.

The amount of stock required is calculated with the help of Stock-To-Sales ratio. For the

calculation of Stock-To-Sales ratio the GMROI% as well as the GM% is needed for the previous

year.

The following table will illustrate the following:

Calculation Of Stock-Sales Ratio:

Store Name Month World

MC

NSNT(*)

Description

Sales

Ratio

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

*COGS: Cost of Goods Sold

GMROI (Gross Margin Return on Investment) = {(NSNT-COGS)/COGS}*100%

GM (Gross Margin) = {(NSNT-COGS)/NSNT}*100%

STOCK TO SALES RATIO = GMROI%/GM%

EXPLANATION

Since the stock to sales ratio for the Salwar Kameez Set for PT-KOLKATA-GARIAHAT ROAD is

2.33 for April 2013 hence for April 2014 also the Stock to Sales ratio for that particular store and

particular MC Description would be 2.33.

Hence if the predicted sales for April 2014 is x then the inventory available for that period

would be x*2.33.

11

CHAPTER 2

LITERATURE

REVIEW

12

2) LITERATURE REVIEW

2.1)

FORECASTING TECHNIQUE:

qualitative. The techniques in the quantitative category include mathematical models such as

moving average, time series method, straight line projection, exponential smoothing,

regression, trend-line analysis, simulation, life-cycle analysis, decomposition, Box-Jenkins,

expert systems, and neural network. The techniques in the qualitative category include

subjective or intuitive models such as jury or executive opinion, sales force composite, and

customer expectations

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)

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

LAST YEARs SALES DATA FROM MIS:

The last years sales data is obtained from a Micro-strategy (MSTR) MIS. MSTR is an MIS which

is used by the Retail Planning department in order to get the sales of the merchandise. Through

this an MC-wise sales report is extracted.

MC-Wise Sales Planning Report:

MC stands for Merchandise Category. Merchandise categories helps to classify and structure all

aspects of the merchandise in the enterprise. In doing so, each article is assigned to a specific

merchandise category.

Now to understand MC let us consider two brands of pantaloons i.e. , ETHNICITY and ALL. Out

of various products under these brands they have a product called as aLLLadiesMixnMatch.

Now for both the brands for this product they are given a particular unique MC Code. Hence

that particular MC Code would stand for that product only irrespective of whether it is made by

some third brand.

Graduation Project | BFT NIFT MUMBAI 2010-2014

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.

factor with respect to 2012

sales data

Beginning Of Month

inventory. (BOM)

well as the GMROI%

sales ratio for a particular

category

years sales plan

World Description

Men Total

Women Western

Total

Non Apps Total

Women Ethnic

Total

Kids Total

Grand Total

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%

YEAR

2009

2010

2011

2012

2013

SALES

1181.8

1261.06

1328.09

1424.17

1658.35

INCREMENT FACTOR

6.7

5.31

7.23

10.1

21

2009

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

Stock-to-Sales ratio = GMROI/GM %( LY)

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

402.55

=169.49

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)

TECHNIQUE FOR MIS)

4.2)

FORECASTING TECHNIQUES

generally involve the use of expert judgment to develop forecast. Such methods are applicable

when the historical data on the variable being forecast are either not applicable or unavailable.

In my project of MIS Automation, building a logic on the basis of judgment and opinions is not

possible for the MIS team to project the future sales. Hence a proper mathematical logic has to

be build which could be used in the form of coding in order to predict the sales. Hence a

quantitative sales forecasting method has to be used.

Quantitative sales forecasting methods can be used when:

1) The past information about the variable being forecast is available.

2) The information can be quantified.

3) It is reasonable to assume the pattern of the past will continue in the future.

In such cases a forecast can be developed using a time series or a casual method.

Quantitative methods are based on an analysis of historical data concerning one or

more time series.

A time series is a set of observations measured at successive points in time or over

successive periods of time.

If the historical data used are restricted to past values of the series that we are trying to

forecast, the procedure is called a time series method.

If the historical data used involve other time series that are believed to be related to the

time series that we are trying to forecast, the procedure is called a causal method.

Time-Series Method:

If the historical data are restricted to past values of the variable to be forecast, the forecasting

method is called as time-series method and the historical data are referred to as a time series.

The objective of time series analysis is to discover a pattern in the historical data or time series

and then extrapolate the pattern into the future; the forecast is based solely on past values of

the variable and/or on past forecast errors.

The pattern of the data is an important factor in understanding how the time series has

behaved in the past. If such behavior can be expected to continue in the future, we can use the

past pattern to guide us in selecting an appropriate forecasting method.

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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

2 (3rd Feb 9th Feb)

3 (10th Feb 16th Feb)

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)

926.53

1012.59

1113.26

548.13

546.85

551.58

603.63

660.83

715.42

1200

1000

SALES

800

600

400

200

0

0

10

WEEKS

28

WEEKS

th

SEASON

AW-13

AW-13

AW-13

SS-14

SS-14

SS-14

SS-14

SS-14

SS-14

nd

2 (3rd Feb 9th Feb)

3 (10th Feb 16th Feb)

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)

587.94

535.34

600.54

368.07

378.94

445.81

491.07

587.36

617.24

700

600

SALES

500

400

300

200

100

0

0

10

WEEKS

3) CATEGORY: NON APPS

WEEKS

th

nd

2 (3rd Feb 9th Feb)

3 (10th Feb 16th Feb)

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)

SEASON

AW-13

AW-13

AW-13

SS-14

SS-14

SS-14

SS-14

SS-14

SS-14

542.35

550.54

638.87

318.81

330.81

331.53

425.9

492.77

517.18

29

700

600

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

2 (3rd Feb 9th Feb)

3 (10th Feb 16th Feb)

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)

414.62

421.83

487.32

293.94

320.27

393.67

300.08

359.95

347.19

600

500

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

2 (3rd Feb 9th Feb)

3 (10th Feb 16th Feb)

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)

203.43

218.96

255.21

129.4

128.4

147.78

200

218.41

250.61

300

250

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:

In this type of sales forecasting method the actual sales for the previous period is taken as the

forecasted sales for the next period. In other words the most recent sales values are taken as

the forecast for upcoming period.

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)

ALL THE HISTORICAL DATA 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)

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

Suppose we use the average of all the historical data available as the forecast for the next

period. We begin by developing a forecast for week 5. Since there is only one historical value

available prior to week 5, the forecast for week 5 is just the time series value in week 1, thus

the forecast for week 5 is 293.34 lakhs. To compute the forecast for week 6, we take the

average of the sales values in weeks 4 and 5. Thus,

Forecast for week 6 =

293.94+320.27

2

Graduation Project | BFT NIFT MUMBAI 2010-2014

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

39.06

2149.13

11.04

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.

36

The moving averages method uses the average of the most recent k data values in the time

series as the forecast for the next period. Mathematically, a moving average forecast of order k

is as follows:

Ft+1 =

( ) +1+.++1

=

where,

Yt = actual value of the time series in period t

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

Exponential smoothing also uses a weighted average of past time series values as a forecast, it

is a special case of the weighted moving averages method in which we select only one weight

the weight for the most recent observation. The weights for the other data values are

computed automatically and become smaller as the observations move farther into the past.

The exponential smoothing equation follows.

where,

Yt = actual value of time series in period t

Ft = forecast of time series for period t

a = smoothing constant (0 <=a <= 1)

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:

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 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:

Graduation Project | BFT NIFT MUMBAI 2010-2014

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.

The trend pattern of sales forecasting is used where we can see a general trend like continuous

rising or continuous decrease in the sales of the product categories.

Earlier through the time series plot it has been shown that all the categories except the Women

Western category shows a trend pattern in the sales data and hence for the forecasting of sales

for those categories trend analysis is used. The method used for trend pattern forecasting is

linear trend regression.

4.14) LINEAR TREND REGRESSION FOR MENs CATEGORY:

1) Lets first of all start with the Mens Category.

LINEAR TREND EQUATION

Tt = b0 + b1t

Where,

b0 = intercept of the linear trend line

b1 = slope of the line trend line

t = time period

42

WEEKS

th

SEASON

SS-14

SS-14

SS-14

SS-14

SS-14

SS-14

rd

2 (24th Feb 2nd March)

3 (3rd March 9th March)

4 (10th March 16th March)

5 (17th March 23rd March)

6 (24th March 30th March)

548.13

546.85

551.58

603.63

660.83

715.42

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:

=1 6 ^ [Yt^]

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

B1 = 615.22/17.5 = 35.15

B0 = 604.4 35.15(3.5) = 487.37

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

Forecasting Errors

Value

MAE

20.4

MSE

560.91

MAPE

3.48

WEEKS

th

SEASON

SS-14

SS-14

SS-14

SS-14

SS-14

SS-14

rd

2 (24th Feb 2nd March)

3 (3rd March 9th March)

4 (10th March 16th March)

5 (17th March 23rd March)

6 (24th March 30th March)

318.81

330.81

331.53

425.9

492.77

517.18

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

B1 = 786.05/17.5 = 44.91

B0 = 402.83 44.91(3.5) = 263.6

Graduation Project | BFT NIFT MUMBAI 2010-2014

45

THE NON APPS SALES TIME SERIES

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

Forecasting Errors

Value

MAE

22.93

MSE

943.72

MAPE

6.38

46

WESTERN:

WEEKS

th

SEASON

SS-14

SS-14

SS-14

SS-14

SS-14

SS-14

rd

2 (24th Feb 2nd March)

3 (3rd March 9th March)

4 (10th March 16th March)

5 (17th March 23rd March)

6 (24th March 30th March)

368.07

378.94

445.81

491.07

587.36

617.24

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

B1 = 958.15/17.5 = 54.75

B0 = 481.41 54.75(3.5) = 289.78

47

THE WOMEN WESTERN SALES TIME SERIES

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

Forecasting Errors

Value

MAE

15.78

MSE

319.66

MAPE

3.57

48

WEEKS

th

SEASON

SS-14

SS-14

SS-14

SS-14

SS-14

SS-14

rd

2 (24th Feb 2nd March)

3 (3rd March 9th March)

4 (10th March 16th March)

5 (17th March 23rd March)

6 (24th March 30th March)

129.4

128.4

147.78

200

218.41

250.61

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

B1 = 464.15/17.5 = 26.52

B0 = 179.1 26.52(3.5) = 86.28

49

THE KIDS SALES TIME SERIES

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

Forecasting Errors

Value

MAE

9.98

MSE

134.45

MAPE

6.61

50

The phase II of the MIS automation deals with the automized sales report generation in order

to get the sales performance for a particular merchandise for that particular week with respect

to certain factors like the last year sales for that particular week or the difference between the

sales as well as the budget planned.

MIS is a Management Information System which deals in generating an automated sales report

consisting of the WTD, MTD, STD as well as the YTD (Week, Month, Season and Year Till Date

Transactions). The output is generated every week on Monday on the basis of some input data

which are as follows:

Article Wise Sales Data for a particular week:

Every product is assigned to a certain article ID. The article wise sales report is the base data

which is required to generate the MIS Sales report. This article wise sales report is extracted

from a MSTR (Micro Strategy) ERP system which contains the sales data associated with that

particular article.

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

RGM which is basically the difference between the NSNT and the COGS is the gross profit the

product has made over the cost of the production.

RGM% = RGM Act/NSNT*100

Intake Margin% ACT = Gross Sales Value(GSV)-Cost of Goods Sold/GSV*100

The initial markup which is applied to a product over the cost of the goods before applying the

Markdown. The price of the product at this stage is called as the Gross Sales Value. The GSV

COGS will actually give the Intake margin amount. Markdowns are applied to this GSV only and

after the markdown is applied it is known as the Net Sales Value.

Hence if a product is sold at its GSV without the markdown being applied then the GSV is same

the Net Sales Value.

Markdown% = Markdown Amount/GSV*100

Generally in order to attract the customers the merchandiser applies certain markdown on the

product which is applied on the intake margin. Markdown %ages are always applied by taking

into consideration the profit margin of the produst.

SSPD(Sales Per Square foot per day): NSNT/(7*area)

0-10% = Yellow

Less than 0% = RED

ALL LTL

0-5% = Yellow

Less than 0% = RED

ALL ABP

90-100% = Yellow

Less than 90% = RED

GM LY% & GM BUDGET % - NO color Code

ALL GM ACT%

Graduation Project | BFT NIFT MUMBAI 2010-2014

55

If actual is less than 95% of budget = RED

IM LY% - No Color

IM ACT%

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 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 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

The phase III is an addition in the existing MIS Automated Report which would display a few

new parameters like the Bought Options, Bought Quantity, Sell-through target, etc.

The base data required for the Phase II are:

Season Master:

A season master is a master file which contains the season name along with the season

description. A stock report which shows the current store as well as warehouse stock

available contains this season stock as well as old season stock. Hence this master file is

needed to classify the season stocks separately.

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

Prepack-BOM:

Table Code:

se16

60

61

CLICK HERE

Clear these

62

prepack codes saved in

notepad

63

64

2) BOM-Component-Quantity

Table Code:

se16

Table Name:

stop

Rest of the procedure is same.

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

then double click on standard area

management

66

ZART_EAN

67

file and the rest of the procedure is

same as of the first one.

To get the ABP Quantity for the next 4 weeks the first task is computing the Average Selling

Price (ASP) for each merchandise.

ASP = One year sales value of a product/Quantity sold

Planned Quantity = Sales Forecast for next 4 weeks/ASP

4.25) DESIGNING THE LAYOUT FOR PHASE III:

68

TY and LY Season Store Stock Quantity:

Arrived at with the help of the stock report and the season master. TY is This Year means SS14 season store stock quantity and LY is Last Year (except) SS-14 Season Store Stock

Quantity.

Net Week Cover (TY Season):

TY Season store stock Quantity/average of last four week sales quantity.

Net Week Cover (ALL Season):

TY + LY Season store stock Quantity/average of last four week sales quantity.

Forward Week Cover (TY Season):

TY Season store stock Quantity/average of next four week sales quantity.

Net Week Cover (ALL Season):

TY + LY Season store stock Quantity/average of next four week sales quantity.

69

CHAPTER 5

RESULTS

70

5.2)

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)

ACTUAL

SALES

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)

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)

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)

ACTUAL

SALES

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.

Because merchandise purchases in relation to planned sales and stock levels are

anticipated, there is less likelihood of being in an overbought position and having to make

markdowns.

Improved Ability to Maintain Markups:

As the stock in hand would not be in much larger quantity hence the maintained markups

would sustain and there will be no need in giving markdowns.

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.

An accurate merchandise plan helps to determine how much money should be spent on

merchandise. Ideally, a planner makes the smallest investment possible in goods that will

satisfy customer demands and sell well enough to build store profits.

76

CHAPTER 7

REFRENCES

77

7.1)

BOOKS:

(Business Forecasting with Student CD [J. Holton Wilson, Barry Keating, Tata

McGrawHill)

Forecasting systems for operations management: Stephen A. Delurgio and Carl

D.Bhame, 1991, (Business One Irwin, Homewood, IL)

Forecasting Methods for Management by Spyros Makridakis and Steven C. Wheelwright

(1977, Hardcover)

Sales Forecasting Management: A Demand Management Approach By John T. Mentzer

& Mark A. Moon)

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