Business Forecasting
Business Forecasting
Contents 1.0 Executive summary…………………………………………………………………………………4 2.0 Introduction……………………………………………………………………………………………5 3.0 Question 1……………………………………………………………………………………………...6 4.1 a) Time series plot…………………………………………………………………………6 4.2 b) Exponential smoothing methods……………………………………………….8 4.3 c) 8 months Forecasted period……………………………………………………11 4.4 d) Forecasting report……………………………………………………………………13 4.0 Question 2…………………………………………………………………………………………….15 5.5 Forecasting in Marketing……………………………………………………………..15 5.6 Financial Forecasting……………………………………………………………………17 5.0 Conclusion…………………………………………………………………………………………….18 6.0 Recommendations………………………………………………………………………………..18 7.0 Appendix………………………………………………………………………………………………19 8.0 References………………………………………………………………………………………….25
1.0 Executive summary
The Holt-Winters multiplicative model proved to be the most applicable method to use to forecast the data for the warehouse store sales (in million dollars) due to it being able to take into account trends and seasonality, which the other methods were not able to show. Unlike moving averages models, the data was non-stationary so the Holt-winters method proved to be the most appropriate exponential smoothing method. The trial and error approaches further validated the compatibility of the Holt-winters multiplicative method through producing the lowest accuracy measures, particularly the lowest MAPE.
The actual results showed that 6 of the 8 months produced lower sales than the forecast had predicted, hence results show that the forecasts were based on more uncertainty rather than more accurate predictions.
Nevertheless, companies require forecasts in order to plan ahead and make predictions. Even though introducing qualitative approaches will help produce more accurate forecasts but the method of predicting figures cannot be dismissed that easily.
A marketing
Contents 1.0 Executive summary…………………………………………………………………………………4 2.0 Introduction……………………………………………………………………………………………5 3.0 Question 1……………………………………………………………………………………………...6 4.1 a) Time series plot…………………………………………………………………………6 4.2 b) Exponential smoothing methods……………………………………………….8 4.3 c) 8 months Forecasted period……………………………………………………11 4.4 d) Forecasting report……………………………………………………………………13 4.0 Question 2…………………………………………………………………………………………….15 5.5 Forecasting in Marketing……………………………………………………………..15 5.6 Financial Forecasting……………………………………………………………………17 5.0 Conclusion…………………………………………………………………………………………….18 6.0 Recommendations………………………………………………………………………………..18 7.0 Appendix………………………………………………………………………………………………19 8.0 References………………………………………………………………………………………….25
1.0 Executive summary
The Holt-Winters multiplicative model proved to be the most applicable method to use to forecast the data for the warehouse store sales (in million dollars) due to it being able to take into account trends and seasonality, which the other methods were not able to show. Unlike moving averages models, the data was non-stationary so the Holt-winters method proved to be the most appropriate exponential smoothing method. The trial and error approaches further validated the compatibility of the Holt-winters multiplicative method through producing the lowest accuracy measures, particularly the lowest MAPE.
The actual results showed that 6 of the 8 months produced lower sales than the forecast had predicted, hence results show that the forecasts were based on more uncertainty rather than more accurate predictions.
Nevertheless, companies require forecasts in order to plan ahead and make predictions. Even though introducing qualitative approaches will help produce more accurate forecasts but the method of predicting figures cannot be dismissed that easily.
A marketing
References: Hanke, John E (2009). Business Forecasting. 9th ed. New Jersey: Pearson Prentice Hall. Chapter 1,3 and 4. Swamidass, Paul M. (2000). Exponential smoothing methods. Encyclopedia of Production and Manufacturing Management. 1 (usa), 462. Kendall. (1984). How To Identify Patterns in Time Series Data: Time Series Analysis. Available: http://www.statsoft.com/textbook/time-series-analysis/. Last accessed 28/12/2012. Goodwin, Paul. (2010). The Holt-Winters Approach to Exponential smoothing: 50 years old and going strong. Available: http://www.forecasters.org/pdfs/foresight/free/Issue19_goodwin.pdf. Last accessed 05/01/2013. Player, Steve. (2010). Why forecasting?. Available: http://bigfatfinanceblog.com/2010/06/01/why-forecasting/. Last accessed 5th Jan 2013. Hicken, Melanie. (2012). 8 Steps Every Business Needs To Take When Forecasting Sales. Available: http://articles.businessinsider.com/2012-02-12/strategy/31051549_1_accurate-forecasting-forecasting-methods-important-forecasting. Last accessed 5th Jan 2013. Ryan, T.P.. (2003). What is Exponential Smoothing?. Available: http://www.itl.nist.gov/div898/handbook/pmc/section4/pmc43.htm. Last accessed 28th December 2012. Bowen, Ronda. (2011). The importance of business forecasting. Available: http://www.brighthub.com/office/entrepreneurs/articles/105591.aspx. Last accessed 27th December 2012. Anderson, David P., Dennis J. Sweeney, and Thomas A. Williams. (1994). Forecasting. Available: http://www.referenceforbusiness.com/small/Eq-Inc/Forecasting.html. Last accessed 2nd Jan 2013. Tim Garrison. (2012). What Form Of Financial Forecasting Works Best?. Available: http://ezinearticles.com/?What-Form-Of-Financial-Forecasting-Works-Best?&id=7174491. Last accessed 5th Jan 2013.