Assignment for Sales Forecasting(SADMAN)

Post Graduate Diploma in Management PGDM 09 Batch

Of NMIMS, Bengaluru

submitted to

Dr. V.V. Gopal

by

Group 6:

Akshit Minocha (B007)

Ivank Kapur (A025)

Rishikant Shastri (A049)

Shubham Chauhan (A058)

 Automobile Industry Sales Forecasting Analysis

Forecasting Methodology @ FORD:

1.Seasonal Naive to establish benchmark:

The data exhibits a seasonality of 12 months. Thus, seasonal naive forecasting includes forecasting
monthly sales using the 12-month prior values in the same time series. This is considered as a
benchmark and subsequent methods are aimed at improving upon this forecast accuracy.

2.Holts-Winter method as the data exhibited trend and seasonality:

Since all data series consistently exhibit trend as well as seasonality, we have chosen to first try out Holt-
Winters method. The training and validation period for all-time series are different, they have been
adjusted to achieve the most accurate forecast.

3.MLR with monthly dummy variables:

Next, we have used multiple linear regression using dummy variables for each month. Depending on the
characteristics of the series both additive and multiplicative regression methods have been used.

4.Ensemble combinations improve results:

Finally, we have tried combinations of Naive, HoltsWinters and Multiple Linear Regression to create
ensembles that can further improve the accuracy of the forecasts.

5.MAPE and residual graphs used to judge and select a final model:
Once these methods are applied, their validation period residuals are plotted together to gauge the
accuracy of each of them. The final model for a particular data series is selected taking into account the
residuals plot and the MAPE values.
 Methods of Sales Forecasting @ DUA MOTORS

Two kinds of methods are used to forecast sales: -

1) Qualitative method
2) Quantitative method

Under Qualitative methods:

a) Executive opinion
b) Delphi method
c) Salesforce Composite
d) Survey of Buyer’s intention) Test marketing

Under Quantitative method:

a) Time series method
b) Moving Average method
c) Exponential smoothening average
 Our ‘Proposed’ method

Collection of sales forecast data.

Determining factors that affect the sales forecast

Internal Factors External Factors

Cost of Production Time
Inventory GDP
Cost of Machine & Purchasing power
Tech. parity
Past sales revenue Economic
Production Condition
Past sales Volume No. of competitors
Rate of inflation
Income per capita
Regulations like
Now, we should consider factors like Seasonality,BS4
Trends, etc. w.r.t. Both the internal
and external factors.

Now, we can apply Multiple Regression to both Internal and External Factors.

Afterwards, we can calculate the Percentage Error (%)

Now, we can plot a regression line taking the error percentage in consideration, and
further, based on that we can forecast the future sales.
 External factors:
These factors (macro factors) were the ones which affected the sales externally, i.e. Those factors
which are beyond the control of the firm. These factors affect the entire industry and not just one
single firm specifically. For example, Excise Duty, Purchasing power parity etc.
Internal Factors:
These factors (micro factors) were the ones which affected the sales internally, i.e. Those factors
within the firm and those which were under the control of the management and the company. These
are factors which at times decide the leader in the market and the competitive edge of the firm. For
example, Cost of production and various types of other costs, technology used etc.

Regression Analysis Method

OVERVIEW:
The premise is that changes in the value of a main variable (for example, the sales of Product A) are
closely associated with changes in some other variable(s) (for example, the cost of Product B). So, if
future values of these other variables (cost of Product B) can be estimated, it can be used to forecast the
main variable (sales of Product A).

BASIC IDEA:
Regression analysis is a statistical technique for quantifying the relationship between variables. In
simple regression analysis, there is one dependent variable (e.g. sales) to be forecast and one
independent variable. The values of the independent variable are typically those assumed to "cause" or
determine the values of the dependent variable. Thus, if we assume that the amount of advertising
dollars spent on a product determines the amount of its sales, we could use regression analysis to
quantify the precise nature of the relationship between advertising and sales. For forecasting purposes,
knowing the quantified relationship between the variables allows us to provide forecasting estimates.

PROCEDURE:
The simplest regression analysis models the relationship between two variables uisng the following
equation: Y = a + bX, where Y is the dependent variable and X is the independent variable. Notice that
this simple equation denotes a "linear" relationship between X and Y. So this form would be appropriate
if, when you plotted a graph of Y and X, you tended to see the points roughly form along a straight line
(as compared to having a curvilinear relationship).
When you have several past concurrent observations of Y and X, regression analysis provides a means to
calculate the values of a and b, which are assumed to be constant. Since you will then know a and b, if
you can provide an estimate of X in some future period, you can calculate a future value of Y from the
above equation.
 Regression Results (From attached Excel of HERO MOTOCORP)

Forecasted Sales Forecasted Demand

Sep-18 8248.43 of 2 wheelers
2019-2020 8,037.57
Dec-18 8349.57
2020-2021 8,422.39
Mar-19 8450.71 2021-2022 8,807.21
Jun-19 8551.85 2022-2023 9,192.03