LEAD TIME & INVENTORY REDUCTION

IN APPAREL SUPPLY CHAIN

Team Synergy

Abhishek Kumar
Mangala M
Rashmi Rao
Jisna P Gopi
ABOUT THE COMPANY

Manufacturing arm of Madura
Garments having brands like
Louis Philippe , Van Heusen ,
Allen Solly and Peter England

It comprises of 4 factories
located in Bangalore , with a
total employee strength close
to 3000.

The product range offered is
mens and womens formal
Shirts , Trousers and Suits
with annual volumes of 43.6
Lakh garments.
Aditya Birla
Group
AB Nuvo
Madura
Garments
Madura
Clothing
Vision: To be a global benchmark for apparel industry in
manufacturing and innovation providing competitive advantage to
stake holders
Note:-To understand the apparel supply chain in brief which will help to understand the project better
APPAREL SUPPLY CHAIN
NEED FOR PROJECT
No well defined and scientific replenishment model and stocking policy
Stagnating sales growth year-on-year basis
High finished goods inventory
Increase in discounted sales year on year leading to profit erosion
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LP Core FG Sales : FY08-10
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LP Core FG Inventory : FY08-10
FG inventory in the range of
5000pcs while Retail sales in
400pcs per month, hence
carrying 10 months more
inventory
Due to such high FG inventory
level, cash flow for business is
blocked and discounted sales
increasing to improve it
PROJECT CHARTER
Business Case : Total Lead time of
Apparel supply chain was 130 days
and there has been no
replenishment leading to high out-
of-stock rate. The inventory level
was very high carrying 9 months
inventory.

This threw up tremendous potential
for improving the lead time and
inventory reduction

Scope: Fabric procurement to
Retail Sales
Relation with business case , approach , scope , CTQs and
benefits were finalized in the charter
SIPOC
Fabric
procurement
from mill
Fabric
storage at
factory
Garment
mfg at
factory
FG
storage at
WH
Retail
store
replenish
Retail
sales
Core
CORE REPLENISHMENT SYSTEM

Factory

Warehouse
Retail Store
Consumer
C
R
S

(

P
u
l
l

S
t
r
a
t
e
g
y
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Fabric Mills

Core products would be managed using continuous replenishment at FG as well as fabric stages
CORE REPLENISHMENT SYSTEM
Core products would be managed using continuous replenishment at FG as well as fabric stages
Orders are
Aggregated
Order
Garment
Production
PO
Preparation
Sends
the order
WO is
generated
WO
Supplies
Fabric PO
Fabric
Order
Details
Fabric
Status
Garments
Pending
Order File
Warehouse Factory
Purchase
Supplier
Customer
FG Stocks,
WIP
Levels
Fabric Stocks
In-Transit, Fabric
RoP Levels
Fabric
Avb.
yes
no
Fulfill
CTQ TREE DIAGRAM

Reduction of
Lead time and
inventory in
Apparel Supply
chain for Core
Replenishment
System

Garment Manufacturing
REWORK%
RECUTTING%
MANUFACTURING LEAD TIME
Finished Goods
INVENTORY (DAYS)
Fabric
LEAD TIME (DAYS)
Retail
RETAIL SALES (PCS)
Critical To Quality
Characteristics (CTQ)
Operational
Definition
Measure
Current
Status
CTQ
Specification
Defect
Definition

KANO
Status
1. FABRIC PROCUREMENT
LEAD TIME (DAYS)

FABRIC LEAD TIME
FROM PO CREATION
TO DELIVERY AT
FACORY STORES
105 Days <15 Days > 15 Days
MUST BE
2. MANUFACTURING LEAD
TIME (DAYS)
TIME FROM WO
CREATION TO
DELIERY AT
FACTORY
WAREHOUSE
18 Days <12 Days > 12 Days
MUST BE

3. FINISHED GOODS
INVENTORY IN WH (DAYS)
FINISHED GOODS
INVENTORY IN DAYS
271Days < 60 Days > 60 Days
MUST BE
4. RETAIL SALES (PCS)
RETAIL SALES IN
PIECES
400 Pcs >500 Pcs < 500 PCS
MUST BE
5. RECUTTING (%)
PANELS
RECUTTING
4% <3% >3%
LOWER THE
BETTER
BATCH RECUTTING
3% <1% >1%
6. REWORK (%) END OF LINE
7.83% < 7% >7%
LOWER THE
BETTER
FQC
1.73% <5% >5%
The project objective (Y) is addressed by focusing on the Must Be CTQs (ys)
identified as shown above
CTQ TABLE
MILESTONE
GANTT CHART

Jun10 Jul10 Aug10 Sep10 Oct10 Nov10 Dec10 Jan11
DEFINE

Project Charter
SIPOC
CTQ Tree Diagram



MEASURE

As-is CTQ Status



APPROACH/ ANALYSIS

Cause & Effect Diagram

FMEA



DEPLOYMENT/ IMPROVE

NVA Identification & stratification

Setting up section wise WIP Norms

Single piece clearance on daily basis

Developing system to monitor online



ASSESSMENT & REVIEW/ CONTROL

Implementing control mechanism

Sustenance (Review & Assessment)
Replication
CTQ 1: FABRIC LEAD TIME REDUCTION AT FABRIC MILL
The Strategic supplier relationship management is required to

Ensure the strategic partnership with fabric mills
Ensure reduced fabric lead time by Vendor managed inventory
Ensure improved service levels for fabric lead time and quality
Ensure building base stock to service peak season demand





ANALYZE
An internal brainstorming
session, helped to narrow
down the Focus area for
Deployment in spoke from
12 Spoke solution design
with strong core
IMPROVE






SATISFACTIONSURVEY
















HALF YEARLY FEEDBACK REPORT
Supplier
Segmentation
(Supplier wise
strategy )
Vendor
Connect
(IT Enablement)
Supplier
Forums
(Relationship
Mapping)
Supplier
Feedback

CONTROL
After establishing Strategic supplier
relationship, critical vendors identified
based on following parameters for
rationalization:
Geographic Location
Delivery, Quality, Cost

VMI has been adopted for critical
vendors by providing them Quarterly
projections to deliver stock on-demand

After implementing VMI, due to
reduction in Fabric lead time and
improved service levels, base stock
was built to service




ESCALATION MATRIX
LEAD TIME
DELAY
VENDOR/
INCHARGE
PURCHASE
MANAGER
SOURCING
HEAD
BRAND
HEAD
14 Days
10 Days
7 Days
2 Days
Safety Stock
Reorder Point
CTQ 2 : GMT MFG LEAD TIME REDUCTION AT FACTORY
The reduction in Garment manufacturing lead time is done by

Ensure timely delivery of finished goods at warehouse against SLA
Identifying potential causes for high manufacturing lead time
Identifying root causes by using FMEA
Implementing improvement solutions for those root causes
Implementing controls to ensure that implemented solutions sustain

DIAGNOSING POTENTIAL ROOT CAUSES
An internal brainstorming
session, helped to narrow
down from 52 xs to more
likely root causes for further
analysis
Single pc clearance
Further, FMEA was carried out to help in prioritizing
the potential root causes
FMEA FOR PRIORITIZING POTENTIAL ROOT CAUSES
Cause
Probability
of
Occurrence
Severity Of
Conseque
nce
Difficulty
of
Detection
(A)
Probability
of
Occurrenc
e
(B)
Consequen
ce
(C)
Detection
Risk
Priority
No. (RPN)
(High / Medium / Low)
Rating (1-6-9) 1 = lowest, 6 =
medium, 9 = highest A x B x C
Lack of work aid Low Medium Medium 1 6 6 36
Mismatching of material Medium Medium Low 6 6 1 36
Fabric Defect & Shade
variation Medium High Low 6 9 1 54
Improper method due to
lack of adherance to SOP Low High Medium 1 9 6 54
Planning procedure
leading to improper
release of work orders Medium High Medium 6 9 6 324
High sectional WIP due
to lack of adherance to
WIP Norms High High Medium 9 9 6 486
Delay in single piece
clearance due to lack of
supervision High High High 9 9 9 729
2 main causes having highest RPNs were selected to work on
High RPN root
causes 486 and
729 respectively
are identified and
action taken to
reduce it
IMPROVEMENT
Delay in single piece clearance due to lack of supervision

Tracking format implemented for
tracking down the single piece in
the section
Operators and supervisors were
educated to clear single piece
Daily review for deviations
Results Statistical Validation
SINGLE PIECE CLEARANCE TRACKING
2-Variance test was done and since p-
value (0.498) is greater than 0.05,
there is no significant change in the
variation

2-sample t-test was done and since
the p-value (0.002) is less than 0.05,
there is significant reduction in
single piece clearance time.
IMPROVEMENT
High Net WIP due to lack of adherance to WIP norms

Section wise norms were fixed
based on the daily production
of section
Implementation of pull system in
WIP based WO release
Daily review for deviations
2-Variance test was done and since p-
value (0.587) is greater than 0.05,
there is no significant change in the
variation

2-sample t-test was done and since
the p-value (0.006) is less than 0.05,
there is significant reduction in Net
WIP (pcs)
Results Statistical Validation
FMEA FOR RESULT VALIDATION
Failure Mode Effect Analysis (FMEA) for Validating the solutions.
Cause Probabi
lity
Severit
y Of
Conse
quence
Difficul
ty of
Detecti
on
(A)
Poten
tial
(B)
Conse
quenc
e
(C)
Detect
ion
Risk
Priority
No.
(RPN)
Implemented Preventive
Action
(A1)
Proba
bility
(B1)
Severi
ty
(C1)
Detec
tion
Residu
al No.

(High / Medium / Low) Rating (1-6-9) 1 =
lowest, 6 = medium, 9 =
highest
A x B x
C
Rating (1-6-9) 1 =
lowest, 6 = medium, 9
= highest
A1 x
B1 x
C1
Lack of work aid
Low Medium High
1 6 9 54

1 6 9
54
Mismatching of
material
Medium Medium Low
6 6 1 36

6 6 1 36
Fabric Defect &
Shade variation
Medium High Low
6 9 1 54

6 9 1 54
Improper method
due to lack of
adherance to
SOP
Low High Medium
1 9 6 54

1 9 6 54
Planning
procedure
leading to
improper release
of work orders
Medium High Medium
6 9 6 324
Implementation of pull
system, WIP based work
order release system
6 1 6
36
High sectional
WIP due to lack
of adherance to
WIP Norms
High High Medium
9 9 6 486
Establishing section wise
WIP norms and ensuring
adherance to it
1 9 6
54
Delay in single
piece clearance
due to lack of
supervision
High High High
9 9 9 729
Establishing single piece
clearance tracking sheet
and ensuring adherance to
it
1 9 6
54
With the implemented
solution RPN of root
causes came down
from 486 and 729 to
54 respectively which
validates the
effectiveness of
solution
Sheet to record details of all
alterations of same product,
different batches
Single piece clearance of monitoring on a day to day basis
Regular training to operators on clearing single pieces on top-priority
On-site board for supervisors to keep tracking single pieces and Section wise WIP
Holding dispatch till 100% single pc clearance
Weekly reviews by Production Manager for ensuring adherance to Section wise WIP
norm and single pc clearance
CONTROL
On-site board for production
monitoring , style description
and daily wo clearance
Standard operating
procedures in all sections to
ensure the process adherence
BENEFITS : MFG LEAD TIME REDUCTION
Two-Sample T-Test and CI: After Tpt time, Before Tpt time
Two-sample T for After vs Before
N Mean StDev SE Mean
After 4 12.50 2.65 1.3
Before 9 29.44 6.37 2.1
Difference = mu (After) - mu (Before)
Estimate for difference: -16.9444
95% upper bound for difference: -12.4122
T-Test of difference = 0 (vs <): T-Value = -6.78
P-Value = 0.000 DF = 10


2-Variance test was done and since p-
value is greater than 0.05, there is no
significant change in the variation

2-sample t-test was done and since
the p-value is less than 0.05, there is
significant reduction in throughput
time.
Reduction in Suits average manufacturing lead time
from 18 days to 12 days (0.4 times improvement)
CTQ 3: FG INVENTORY REDUCTION AT WAREHOUSE
The Warehouse replenishment system for finished goods to warehouse required to

Ensure work orders are created to fill the inventory gap at warehouse
Ensure that replenishment is aligned to sales as per pull model
Ensure that inventory carrying cost of finished goods is reduced



Warehouse replenishment approach to provide the brands with a competitive advantage of
Replenishment Model, which characterizes
Planning Horizon of fortnight with Weekly Wave Model of Work Ordering and Delivery cycle
IMPROVE
Factory
Warehouse
Wo Creation
Pre-production
activity (1
Days)
11 Days
against
SLA
Wo Release
Forecasting/
WH Stock Gap
against Norm
Every
Monday
Productio
n Plan for
filling Gap
Fabrics &
Trims in-stock
Every
Tuesday
1 Day
Every
Tuesday
Entoma
Warehouse
(Retail)
2 Days
Retail
Store
1 Day
IMPROVE (Contd)
Work ordering cycle : Weekly (on every Tuesday),
Delivery cycle : 12 working days from day of work order creation for blazers/
Suits
MOQ per style code : 10 pcs (based on cutting and marker laying efficiency)
Fabric Norm: 1 month of sales
Warehouse Norm: 1 month of sales

Assessment Mechanism (Daily)
OTIF
Lead Time

Review Mechanism (Quarterly)
WH Inventory
Fabric Inventory

Service level Agreement

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MF&L INVENTORY REPLENISHMENT
MODEL (MONTH ON MONTH) - AW
GAP REPLENISHMENT
CONTROL
Based on the Scenarios,
work order were created to
replenish the gap in
warehouse inventory
Daily Status of Work orders
were sent to brands for
ensuring the transparency in
work order execution
ESCALATION MATRIX
LEAD TIME
DELAY
SUPERVISOR PRODUCTION
MANAGER
FACTORY
MANAGER
HEAD OF
MFG
4 Days
3 Days
2 Days
1 Day
For process, Smart Transactional
Excel Macros were developed for:
Monitoring Retail Sales
Monitoring Retail Inventory
Monitoring WH Inventory
Monitoring Gap in WH inventory
against Norm due to retail sales
Work order need to be created
based on gaps on weekly basis

To improve the transparency in work
order execution as control sheet, Daily
status is sent to all stakeholders

Escalation matrix established for
handling lead time delays

BENEFITS : FG INVENTORY REDUCTION
Two-Sample T-Test and CI: After Inventory, Before Inventory
Two-sample T for After Inventory vs Before Inventory
SE
N Mean StDev Mean
After Inventory 7 72.4 28.4 11
Before Inventory 5 208.6 68.8 31
Difference = mu (After Inventory) - mu (Before Inventory)
Estimate for difference: -136.171
95% upper bound for difference: -66.697
T-Test of difference = 0 (vs <): T-Value = -4.18
P-Value = 0.007 DF = 4



2-Variance test was done and since p-
value is greater than 0.05, there is no
significant change in the variation

2-sample t-test was done and since
the p-value is less than 0.05, there is
significant reduction in inventory
Reduction in Suits inventory from 9 months to 2
months (4.5 times improvement)
CTQ 4: SALES IMPROVEMENT AT RETAIL STORE
The Retail replenishment system for finished goods to retail stores is required to

Ensure timely delivery of finished goods at retail store against SLA
Ensure STO are created to fill the inventory gap at retail stores
Ensure that replenishment is aligned to sales as per pull model
Ensure that sale of finished goods is improved

Retail replenishment approach would ensure that local customer preferences as well as
brands targeted sales is maintained...
IMPROVE
Provide information on store traffic, demand patterns, gaps in merchandise
Provide with weekly control reports to monitor inventory and store look
IMPROVE
Retail management system -Micro
strategy and Business warehouse
was implemented in year 2009 to
provide transparency across the 68
retail stores of LP
Store Sales
Store Inventory
In-transit inventory

To replenish retail stock in northern
and western region, couriers are
used to reduce replenishment time
within 3 days

All India One Stock (AIOS)
system deployed for cross-
docking, one retail store to another
retail store




Micro strategy software to
monitor store sales,
inventory
Business warehouse
software to monitor in-transit
inventory and AIOS system
CONTROL
ESCALATION MATRIX
OUT OF
STOCK
VENDOR/
INCHARGE
RETAIL
MERCHANT
RETAIL
HEAD
BRAND
HEAD
4 Days
3 Days
2 Days
1 Day

For process, Out-of-stock and Transit
time is monitored and reviewed on daily
basis based on:
Retail Sales
Retail Inventory
Retail inventory norm
Monitoring gap in Retail inventory
against Norm
Stock transfer order need to be
created based on gaps

Escalation matrix established for
handling transit time delays

Store Transit
Time (Days) Before After
%
Improvement
APK 2.56 1.38 46.09%
TN/ KERALA 2.45 1.28 47.76%
WEST 6.28 2.96 52.87%
NORTH 7.43 3.21 56.80%
AVERAGE 4.68 2.21 52.83%
(IN PCS)
Month Norm
Actual
Stock
Out-of-
stock
Sales
Loss %
Jul 1367 932 435 32%
Aug 1367 830 537 39%
Sep 1367 1067 300 22%
Oct 2734 2568 166 6%
Nov 2734 2876 0 0%
Dec 2734 2754 0 0%
BENEFITS : SALES IMPROVEMENT
Two-Sample T-Test and CI: Before Sale, After Sale
Two-sample T for Before Sale vs After Sale
SE
N Mean StDev Mean
Before Sale 12 174.7 43.0 12
After Sale 3 717.7 38.7 22
Difference = mu (Before Sale) - mu (After Sale)
Estimate for difference: -543.000
95% upper bound for difference: -482.904
T-Test of difference = 0 (vs <): T-Value = -21.26
P-Value = 0.000 DF = 3



2-Variance test was done and since p-
value is greater than 0.05, there is no
significant change in the variation

2-sample t-test was done and since
the p-value is less than 0.05, there is
significant improvement in sales
Increase in Suits retail sales from avg 400 pcs sales to
avg 785pcs in peak season (2 times improvement)
OVERALL BENEFIT

FINANCIAL BENEFIT FOR SUITS & BLAZER IN RETAIL CHANNEL
BUDGETED SALES PROJECTION (JAN11-DEC11) 3375 pcs (Rs. 1.68 crores/ Annum)
DUE TO RETAIL REPLENISHMENT, 40% REDUCTION IN BUDGETED SALES LOSS
NOV10- JAN11 ACTUAL SALES IMPROVEMENT 800 PCS, ACTUAL EXTRA REVENUE Rs20 Lacs

EXPECTED SALES IMPROVEMENT DUE TO RETAIL REPLENISHMENT 1350 pcs/ Annum
EXPECTED PROFIT DUE TO SALES IMPROVEMENT Rs33.6 Lacs/ Annum (Profit@Rs 2500/pc)


NET LEAD TIME REDUCTION
(FABRIC + MANUFACTURING + RETAIL REPLENISHMENT) LEAD TIME
BEFORE, 105 + 18 + 7 (Max in case of Delhi) 130 Days
AFTER, 15+12+3 (Max in case of Delhi) 30 Days
IMPROVEMENT IN LEAD TIME 4 TIMES





FUTURE ROADMAP
Automating the mechanism for forecasting Channel wise sales
trend by identifying the best tool among the several tools by Q1

Automating the process of setting the inventory norm across the
supply chain quarterly by Q1

Automating the transaction, which triggers the stock transfer order,
work order for style codes and purchase order for fabric codes by Q2

Increasing the Scope of this project to different products and
channels

BRAND CHANNEL PRODUCT EXP TIME
LP RETAIL S&B
LP TRADE S&B Q1
LP RETAIL SHIRT Q2
LP TRADE SHIRT Q2
LP RETAIL TROUSER Q1
LP TRADE TROUSER Q1
VH RETAIL S&B Q1
VH TRADE S&B Q1
VH RETAIL SHIRT Q1
VH TRADE SHIRT Q1
VH RETAIL TROUSER Q2
VH TRADE TROUSER Q2
THANK YOU
SUPPORTING DATA
NORMS CALCULATION FOR FABRIC & FG
REORDER POINT = SAFETY STOCK + AVERAGE DEMAND DURING LEAD TIME
SAFETY STOCK = SERVICE LEVEL x STD DEV OF PROJECTION x SQRT(LEAD TIME)

NORMS CALCULATION FOR RETAIL STORE
RETAIL INVENTORY NORM = 5 x BUDGETED SALES (ADOPTED BY MKTNG DEPTT)







FORECAST FOR LP CORE STYLE CODES
LINEAR REGRESSION
0
200
400
600
800
1,000
1,200
1,400
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Y

X Variable 1
X Variable 1 Line Fit Plot
Y
Predicted Y
Y = AX + B

A = 5.0852174
B = 632.18478
MONTHLY ADJUSTMENT
2008-09 2009-10 MTH. AVE CUM AVE MONTHLY FACTOR
APRIL 676 379 528 696 0.758174632
MAY 580 400 490 696 0.704022989
JUNE 577 487 532 696 0.764367816
JULY 610 745 678 696 0.97341954
AUGUST 752 781 767 696 1.101293103
SEPTEMBER 423 458 441 696 0.632902299
OCTOBER 669 494 582 696 0.835488506
NOVEMBER 1,009 1,029 1,019 696 1.46408046
DECEMBER 985 1,016 1,001 696 1.4375
JANUARY 1,014 1,308 1,161 696 1.668103448
FEBRUARY 845 714 780 696 1.119971264
MARCH 374 373 374 696 0.536637931
ADJUSTED FORECAST
2010-11(R) 2010-11(A)
APRIL 759 576
MAY 764 538
JUNE 769 588
JULY 775 754
AUGUST 780 859
SEPTEMBER 785 497
OCTOBER 790 660
NOVEMBER 795 1164
DECEMBER 800 1150
JANUARY 805 1343
FEBRUARY 810 907
MARCH 815 437
GRAPH

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400
600
800
1,000
1,200
1,400
1,600
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V

2
0
0
8
D
E
C

2
0
0
8
J
A
N

2
0
0
9
F
E
B

2
0
0
9
M
A
R

2
0
0
9
A
P
R

2
0
0
9
M
A
Y

2
0
0
9
J
U
N

2
0
0
9
J
U
L

2
0
0
9
A
U
G

2
0
0
9
S
E
P

2
0
0
9
O
C
T

2
0
0
9
N
O
V

2
0
0
9
D
E
C

2
0
0
9
J
A
N

2
0
1
0
F
E
B

2
0
1
0
M
A
R

2
0
1
0
A
P
R

2
0
1
0
M
A
Y

2
0
1
0
J
U
N

2
0
1
0
J
U
L

2
0
1
0
A
U
G

2
0
1
0
S
E
P

2
0
1
0
O
C
T

2
0
1
0
N
O
V

2
0
1
0
D
E
C

2
0
1
0
J
A
N

2
0
1
1
F
E
B

2
0
1
1
M
A
R

2
0
1
1
SALES % CALCULATION
BRAND
AVERAGE Sales%
LP CORE 326 44.10%
ROLL DOWN
BRAND SALES%
APR
2010
MAY
2010
JUN
2010
JUL
2010
AUG
2010
SEP
2010
OCT
2010
NOV
2010
DEC
2010
JAN
2011
FEB
2011
MAR
2011
576 538 588 754 859 497 660 1164 1150 1343 907 437
LP 44.10% 254 237 259 333 379 219 291 513 507 592 400 193
ROLL DOWN (LAST YEAR %)
APR
2010
MAY
2010
JUN
2010
JUL
2010
AUG
2010
SEP
2010
OCT
2010
NOV
2010
DEC
2010
JAN
2011
FEB
2011
MAR
2011
576 538 588 754 859 497 660 1164 1150 1343 907 437
LP 43.28% 249 233 255 326 372 215 286 504 498 581 393 189
ROLL DOWN (LAST YEAR % M-O-M)
APR
2010
MAY
2010
JUN
2010
JUL 2010
AUG
2010
SEP
2010
OCT
2010
NOV
2010
DEC
2010
JAN
2011
FEB
2011
MAR
2011
576 538 588 754 859 497 660 1164 1150 1343 907 437
LP(%) 45.12% 53.25% 64.89% 45.23% 58.00% 58.30% 55.06% 45.77% 32.78% 27.98% 35.71% 69.44%
LP 260 287 382 341 498 290 363 533 377 376 324 304
COMPARISON OF ROLL-DOWN METHODS w.r.t LP
APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR
LP
CORE
2009-
10
171 213 316 337 453 267 272 471 333 366 255 259
LP
CORE
2010-
11

254 237 259 333 379 219 291 513 507 592 400 193
LP CORE
2010-11(LY
SP)
249 233 255 326 372 215 286 504 498 581 393 189
LP
CORE
2010-
11(LY
SP M-O-
M)

260 287 382 341 498 290 363 533 377 376 324 304




SIMPLE REGRESSION MODEL
EXAMPLE FOR A DEPARTMENT SOTRE:
YEAR QUARTER SALES
(RS.1,000)
YEAR QUARTER SALES
(RS.1,000)
1 20 1 40
1 2 30 3 2 60
3 50 3 80
4 70 4 90
1 30 1 50
2 2 40 4 2 80
3 60 3 90
4 80 4 100
TREND LINE : Y = a + bt
n
t b - y
a

Where,

2
2
t t n
y t - ty n
b
t y ty y
2
t
2
t y ty y
2
t
2
1 20 20 400 1 9 40 360 1600 81
2 30 60 900 4 10 60 600 3600 100
3 50 150 2500 9 11 80 880 6400 121
4 70 280 4900 16 12 90 1080 8100 144
5 30 150 900 25 13 50 650 2500 169
6 40 240 1600 36 14 80 1120 6400 196
7 60 420 3600 49 15 90 1350 8100 225
8 80 640 6400 64 16 100 1600 1000
0
156
y = 970, t = 136, ty = 9600, y
2
= 67,900 and t
2
= 1496
3.9853
(136) - (1496) (16)
(970) (136) - (9600) (16)
b
2

t 3.98553 26.75 y
26.75
(16)
(136) (3.9853) - 970
a
2


125
100
75
50
25
0
TREND LINE
Y = 26.75 + 3.9853{T)
PROJECTED
TREND
LINE
FORECAST
ADJUSTED
SEASONAL
VARIATIONS
ACTUAL
SALES
4
8 12
16
T ACTUAL
SALES
y
SALES
ESTIMATED

Y



%
t ACTUAL
SALES
SALES
ESTIMATED

Y

1 20 30.73 65.008 11 80 70.59 133.34
2 30 34.72 86.40 12 90 74.57 120.69
3 50 38.70 129.19 13 50 78.55 63.65
4 70 42.69 163.97 14 80 82.52 96.92
5 30 46.67 64.28 15 90 86.53 104.48
6 40 50.66 78.95 16 100 90.51 110.48
7 60 54.64 109.80 17 94.50
8 80 58.63 136.44 18 98.48
9 40 62.61 63.88 19 102.47
10 60 66.60 90.09 20 106.64
SEASONAL ADJUSTMENTS:
SEASONAL ADJUSTMENT FACTOR:
QUARTER SEASONAL ADJUSTMENT FACTOR
132.89%
4
48 . 110 120.69 .44 136 163.97
4
114.08%
4
104.01 113.34 09.80 129.19
3
88.09%
4
96.92 90.09 78.95 86.40
2
64.22%
4
63.65 63.88 64.28 65.08
1