YEAR SALES OF FURNITURE

TABLE
1999 1024
2000 1328
2001 1243
2002 1531
2003 1698
2004 1424
2005 1801
2006 1927
2007 2026
2008 2198
SIDCO SALES EMPORIUM,TRIVANDRUM

The particular item from the SIDCO SALES EMPORIUM,

TRIVANDRUM that is considered for this demand fore-
casting study is furniture table.

Data on sale of furniture table

LEAST SQUARE METHOD
(i)Linear Trend

S=a+bT

where S=annual sales

T=time(years)
a and b are constants.The parameter b gives the measure of
annual increase in sales.

The co-efficients a and b are estimated by solving the following

two equations based on the principle of least square.

£S =na + b£T ……..(i)

£ST=a£T + b£T^2 …….(ii)

Table 1 Estimation of Trend Equation

Year Sales T T^2 ST
1999 1024 1 1 1024
2000 1328 2 4 2656
2001 1243 3 9 3729
2002 1531 4 16 6124
2003 1698 5 25 8490
2004 1424 6 36 8544
2005 1801 7 49 12607
2006 1927 8 64 15416
2007 2026 9 81 18234
2008 2198 10 100 21980
n=10 £S=16200 £T=55 £T^2=385 £ST=98804

By substituting the numerical values given in Table 1 in Eqs.

(i) and (ii),we get

16200=10a+55b ……….(iii)
98804=55a+385b ………..(iv)
On solving Eqs(iii) and (iv),we get
a=973.0667 and b=117.624

we get trend equation as

S=973.0667+117.624T

The demand for the furniture table for year from 2009 to 2015 can
be estimated using this trend equation.The calculation procedure
is given below.

2009, S2 = 973.0667 + 117.624 (11) = 2266.99

2010, S3 = 973.0667 + 117.624 (12) = 2384.55
2011, S4 = 973.0667 + 117.624 (13) = 2502.178
2012, S5 = 973.0667 + 117.624 (14) = 2619.8027
2013, S6 = 973.0667 + 117.624 (15) = 2737.426
2014, S7 = 973.0667 + 117.624 (16) = 2855.05
2015, S8 = 973.0667 + 117.624 (17) = 2972.674

DATA ON FUTURE SALE OF FURNITURE TABLE

YEAR SALES
2009 2266.99
2010 2384.55
2011 2502.178
2012 2619.8027
2013 2737.426
2014 2855.05
2015 2972.674
 ECONOMICS FOR BUSINESS

ANALYSIS OF DEMAND AND DEMAND

FORECASTING
ASSIGNMENT

SUBMITTED BY,
ANOOJA.K.S.
Ist YEAR MBA

INSTITUTE OF COOPERATIVE MANAGEMENT

 DEMAND FORECASTING

Demand forecasting is predicting the future demand for firm’s

product.The objective of demand forecasting is achieved only
when forecast is made systematically and scientifically and when it
is fairly reliable.The following steps are generally taken to make
systematic demand forecasting.
(i)Specifying the objective.
(ii)Determining the time perspective.
(iii)Making choice of method for demand forecasting.
(iv)Collection of data and data adjustment.
(v)Estimation and interpretation of results.
TECHNIQUES OF DEMAND FORECASTING
SURVEY METHOD
(i)Consumer Survey Method-Direct Interviews.The consumer
survey method of demand forecasting involves direct interview of
the potential consumers.Consumers can be interviewed by any of
the following methods,depending on the purpose,time and cost of
survey.
(a) Complete enumeration method (b) Sample survey
(c) End-use method
(a)Complete enumeration method. In this method almost all
potential users of the product are contacted and are about their
future plan of purchasing the product in question.For example, if
majority of households in a city report the quantity (q) they are
willing to purchase of a commodity , then total probable demand
(Dp) may be calculated as
n
Dp=q1+q2+q3+…………+qn=£ q1
i=1

where q1,q2,q3etc denote demand by the individual household 1,

2,3 etc.
(b) Sample Survey Method:Sample survey method is used when
population of the target market is very large.Only a sample of
potential consumers or users is selected for interview.
(c)The End-Use Method:Making forecasts by this method require
building up a schedule of probable aggregate future demand for
inputs by consuming industries and various other sectors.
(ii)Opinion Poll Methods.The opinion poll methods aim at
collecting opinion of those who are supposed to posses knowledge
of the market
(a) Expert –opinion method
(b) Delphi method
(c) Market studies and experiments.
(a) Expert –opinion method: Firms having a good network of
sales representatives can put them on to the work of
assessing the demand for the target product in the
areas,region or cities that they represent .The estimates of
demand thus obtained from different regions are added up
to get the overall probable demand for a product.
(b) Delphi Method: Under Delphi method ,the experts are
provided information on estimates of forecast of other
experts along with the underlying assumptions.The experts
may revise their own estimates in the light of forecast
made by other experts.
(c) Market Studies and Experiments: An alternative method
of collecting necessary information regarding current and
also future demand for a product is to carry out market
studies and experiments on consumer’s behaviour under
actual,though controlled,market conditions.
STATISTICAL METHODS
(i)Trend Projection Methods :This method is essentially
concerned with study of movement of variables through
time.The use of this method requires a long and reliable time-
series data.The trend projection method is used under the
assumption that the factors responsible for the past trends in the
variable to be projected will continue to play their part in future
in the same manner and to the same extent as they did in the
past in determining the magnitude and direction of the variable.
There are three techniques of trend projection based on time-
series data
(a)Graphical method (b) Fitting trend equation or least square
method (c) Box-Jenkins method
(a)Graphical method:Under this method,annual sales data is
plotted on a graph paper and a line is drawn through the plotted
points.Then free hand line is so drawn that the total distance
between the line and the points is minimum.
(b) Fitting trend equation:Least Square Method
(i)Linear Trend :When a time series data reveals a rising trend
in sales ,then a straightline trend equation of the following form
is fitted.
S = a + bT
Where S=annual sales,T=time(years),a and b are constants.The
parameter b gives the measure of annual increase in sales.
(ii)Exponential Trend :When the total sale has increased over
the past years at an increasing rate or at a constant percerntage
rate per time unit,then the appropriate trend equation to be used
is an exponential trend equation of any of the following forms.
(1) If trend equation is given as
Y=ae^bT
then its semi-logarithmic form is used
logY = log a + bT
(2) If trend equation takes the form
Y = a T^b
Then its double logarithmic form is used
log Y = log a + b log T
(3) Polynomial trend of the form
Y=a + bT + c T^2
In these equations a,b,c are constants,Y is sales,T is time and
e=2.178
(d)Box-Jenkins method :It is used only for short-term
projections and predictions.
(i)Autoregressive Model:In a general autoregressive model,the
behaviour of a variable in a period is linked to the behaviour of
the variable in future periods.The general form of the
autoregressive model is given below.
Yt=a1 Yt-1+a2 Yt-2+……….+anYt-n+et
This model states that the value of Y in period t depends on the
values of Y in periods t-1,t-2,…..,t-n.The et is the random
portion of Yt that is not explained by the model.
(ii)Moving Average Model:The moving average model
estimates Yt in relation to residuals (et) of the previous
years.The general form of moving average model is given
below.
Yt=m+b1et-1+b2et-2+…….+bpet-p+et
Where m is the mean of the stationary timeseries and et1,
et-2,……et-p are the residuals,the randomn components of Y in
t-1,t-2,……..,t-p periods
(iii)Autoregressive-Moving Averge Model:After moving
average model is estimated ,it is combined with autoregressive
model to form the Box_Jenkins model ,called autoregressive-
moving average model,given below
Yt=a1Yt-1+a2 Yt-2+…+an Yt-n+b1 et-1 +
b2 et-2+….+bpet-p+et
(ii)Barometric Method of Forecasting:It follows the method
mseteorologists use in weather forecasting.Meteorologist use
the barometer to forecast the weather conditions on the basis of
mercury in the barometer.
(iii) Econometric Methods :This method combines statistical
tools with economic theories to estimate econometric variables
and to forecast the intended economic variables.
SIDCO SALES EMPORIA,TRIVANDRUM

Marketing division of Sidco provides assistance to Small Scale

Units in canvassing ordes from Government Departments and
Public Sector Undertaking by way of Contract Marketing and
Tender Marketing .There are seven Sales emporia and seven
marketing centres all over Kerala.In light of Government orders
from time to time SIDCO can supply various furniture to
government departments .In 2007-08 the total turnover of
marketing division was Rs25 crores.The target fixed for the year
2008-09 is Rs30 crores.