ARIJIT MONDAL

M.B.A. (2nd Semester, Sec-A, Roll No- 10) Assignment on Demand Forecasting: Calculate the Forecasted Sales for the year (2005 to 2010):
Sales figures in crore Rs. Year 1998 1999 2000 2001 2002 Q1 40 38 13 45 41 Q2 25 26 22 29 26 Q3 15 13 18 14 18 Q4 30 28 33 30 29

For calculating the Forecasted Sales for the year (2005 to 2010), we need to calculate the following steps: 4-Quarter Moving Average. Central Moving Average. Specific Seasonal Index. Seasonal Index. Deseasonalized Demand. Calculation of Trend line (T) parameter. Cyclical Component (C) Analysis. Random Component (R) Analysis.

Trend (T) refers to long-term growth or decline in average level of demand. Business-cycle (C) refers to large deviation of actual demand values from expected (trend line) due to complex environment influences. Random component (R) is the irregular residual in the demand due to many complex random forces in the environment. Multiplicative Model:

Y=T.C.S.R.

Calculation for 4-Quarter Moving Average:

4-quareter moving average is the average of four sales quarters during the period. Example:
year 200 0 Q1 Q2 Q3 Q4 2001 Q1 Q2 Q3 Q4 Quart er Sales 20 32 24.75 22 23.5 25 21.75 15 25.25 25 26.75 36 31 4-Qtr Moving Avg

24.75= (20+32+22+25)/4 23.5= (32+22+25+15)/4 & so on.

Variation Estimation of Actual Demand &

4-Quarter Moving Average:

Blue Dots= Actual demand. Red Dots= Average Demand. **

Data collected from table1 for the graph.

 Calculation for Central Moving Average: Central moving average is the average of 4-quarter moving average during the period. Example:
Quart year er 2000 Q1 Q2 Q3 Q4 2001 Q1 Q2 Q3 Q4 4-Qtr Sales Moving Avg 20 32 24.75 22 23.5 25 21.75 15 25.25 25 26.75 36 31 26 23.5 22.625 24.125 Central Moving Avg

24.125= (24.75+23.5) 22.625= (23.5+21.75) & so on..

Variation Estimation of Actual Demand & 4-Quarter Moving Average & Central Moving Average:

Green Dots= Central Moving Average.

**Data collected from Table1 for the graph.

 Calculation for Specific Seasonal Index: To calculate Specific Seasonal Index, Specific Seasonal Index Example:
Quart er Sale s 20 32 24.75 Q3 Q4 200 1 Q1 Q2 Q3 Q4 22 23.5 25 21.75 15 25.25 25 26.75 36 31 26 0.962 23.5 0.638 22.625 1.105 24.125 0.912 4-Qtr Movin g Avg Central Moving Avg Specific Seasonal Index

= (Actual Demand / Central Moving Average.)

year 200 0 Q1 Q2

0.912= 22/24.125 1.105= 25/22.625 & So on

Variation Estimation of Specific

Seasonal Index:

**Data collected from Table1 for

the graph.

 Calculation for Seasonal Index:

Year Q1 Q2 Q3 Q4 199 1.10 8 0.55 5 199 0.98 1.43 9 1.407 1 0.562 5 200 0.66 1.05 1.08 0 2 3 0.705 6 200 1.46 1.06 1 3 0.97 0.482 6 200 0.90 2 1.451 8 Modified sum Modified mean 2.858 1.429 1.95 1 0.97 6 1.11 2 0.55 6

Maximum fluctuation. Minimum fluctuation.

2.19 1 Total 1.09 Modified 6 Mean Adjustme nt constant = 4.056 0.9861 93

Quart er Q1 Q2 Q3 Q4

Season Mod Adju al Mean cont. index 1.42 0.98619 9 33 1.409 0.97 0.98619 55 33 0.962 0.55 0.98619 6 33 0.548 1.09 0.98619 6 33 1.080

Following process has to be taken for calculating of

Seasonal index: With respective years & quarters, the figures are taken. Identify the maximum and minimum fluctuations with respective quarters.

Omit the maximum and minimum figures for each quarter.

Calculation of modified sum. Calculation of modified mean. Total of all modified mean of all quarters. Calculate Adjacent constant (e= 4/total of the modified mean).

Use the adjacent constant together with modified mean to calculate seasonal index (SI).

SI= (modified mean of each quarter * adjusting constant) Graph Showing the Seasonal Index:

Blue Dots= Seasonal Index.

**Data taken from table1 for the seasonal

index graph

Graph Showing the Seasonal Index, Actual demand & 4-Quarter moving central:

**Data taken from Table1 for the graph.

Calculation for Deseasonalized demand: Deseasonalized demand (TCSR/S) = (Actual Demand / Seasonal Index) Example:
Sales 50 35 45 55 25 Seasonal Index(S) 28.38 25.99 27.36 27.77 26.96 TCR=TCSR/S 1.762 1.347 1.645 1.981 0.927

1.762=50/28.38 1.347=35/25.99 & So on.

Variation estimation of Actual demand, 4-qtr moving average & Deseasonalized Demand:

Red Dots= 4-qtr centerl average. Blue Dots= Actual Demand. Green Dots= De-seasonalized Demand. **Data taken from Table1 for the Graph.

Calculation for Actual Trend Sales:

Base year is 2002 as because it is in the middle year as total number of year is uneven. When number of year is uneven should follow the following formula. X= (Base year current year)*2 So, is substracted from base year and not any value is considerd. Number of year= n. If Y=na + b X. (1) Then, a= ( Y - b X)/n

a = Y/n

( X=0)

If XY= a X+b x2 (2) Then, xy= ( XY-a X)/ X2

b= XY/ x2

( X=0)

Then calculate the Actual Sales Trend from (a+b*X). Graph showing for the Actual Trend of Demand:

**Date taken from Table1 for Actual trend of demand.

Calculation for Cyclical Component Analysis:

The cyclical component(CR) is isolated by dividing TCR by T. Cyclical component c is created by avereage of thrre CR. Example:
Sale s 50 35 45 55 25 TCR 28.38 25.99 27.36 27.77 26.96 Trend 25.25 25.43 25.61 25.80 25.98 CR 1.124 1.022 1.068 1.077 1.038 1.071 1.056 1.061 "C"

CR= TCR/Trend C= avereage three CR.

Graph showing for Cyclical Component:

**Data taken from table1 for Cyclical Component. Cyclical Component scatter plot formula = three quarter moving average of CR.

Calculation for Random Component: Random Component R = CR/C

Example:
Sal es 50 35 45 55 25 TCR 28.38 25.99 27.36 27.77 26.96 Trend 25.25 25.43 25.61 25.80 25.98 CR 1.124 1.022 1.068 1.077 1.038 1.071 1.056 1.061 0.9 5 1.0 1 1.0 1 "C" "R"

0.95= 1.022/1.071 1.01= 1.068/1.056 & So on

Graph showing for Random Componnet:

Year

Quart Time er Code "x"

37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83

Sales (y=a+b*x)
30.38 30.56 30.74 30.93 31.11 31.29 31.48 31.66 31.84 32.03 32.21 32.39 32.58 32.76 32.94 33.13 33.31 33.49 33.68 33.86 34.04 34.23 34.41 34.59

**Data taken from Table1 for random component.

2005 Q1 Q2 Q3 Q4 2006 Q1 Q2 Q3 Q4 2007 Q1 Q2 Q3 Q4 2008 Q1 Q2 Q3 Q4 2009 Q1 Q2 Q3 Q4 2010 Q1 Q2 Q3 Q4

Calculation for Forecasted Trend Demand for the year (2005 to 2010):

Forecastd trend demand ; Y= (a+b*X).

a=26.9 9, b=0.01 96

Graph showing for Forecasted Trend Demand:

Table1: