Linear trend equation Technique:

Trend Equation. A linear trend equation has the form

Ft _ a _ bt (3–8)

where

F t _ Forecast for period t

a _ Value of F t at t _ 0

b _ Slope of the line

t _ Specified number of time periods from t _ 0

The sales pattern of XYZ Company in the previous 2 years has a substantial linear growth. Ergo
the linear trend technique will prove to be fruitful and thus it requires an in depth analysis.

The linear trend technique is a worthy technique for XYZ, but due to the sales decline in the
previous 5 month has affected the forecasting accuracy. Therefore it has been excluded it from
my recommendation

 The current moving average forecasting technique is not accurate as it has higher
percentage of error
 However weighted moving average and exponential smoothing are comparatively
better results in 2014, whereas the weighted average is showing less error in 2015
forecast.
 YEA Moving Weighted Moving Exponential
      linear trend
R Average Average Smoothing

  MAD   MAD   MAD 125.92   MAD

171 145.3 327

2014 MSE   MSE   MSE 21967   MSE

38,409 28,318 1,396,945

  MAP 2.07%   MAP   1.53   MAP 3.93%

MAPE
E E 1.77 E

  MAD   MAD   MAD 337.31   MAD

472.50 236.67 773

2015 MSE   MSE   MSE 251575   MSE

371,486 169109 738,514

  MAP 5.87%   MAP   4.18   MAP 9.51%

MAPE
E E 2.92 E

Conclusion:

 The XYZ Co. has excess capacity and in order to utilize it is utmost important to
increase the sales. The sales performance has been declining which is also effecting
the forecasting. The management has to analyze deeply the reason of declining sales
and take corrective measures to improve it by introducing some attractive incentives
and rectifying the customer’s complains and addressing quality and other issues.
 It is understandable that XYZ Co. Has glitches in forecasting which is not considered
as a main activity and it seems there is no close coordination between Sales and
Operations. They have to introduce the rolling forecast for 9 months to 12 months,
freezing the forecast for 1 to 3 months, subject to accuracy. Moreover it is also
 recommended to use qualitative and judgmental approach beside the quantitative
approach.
 In order to regain the market share the XYZ Co. has to grow by approx. 8% this year
and 20% next year in order to achieve the same pattern of 2014 that improve the XYZ
situation of forecasting and capacity utilization besides the market share.
 The following sales projections recommended to improve the XYZ results.
Sales Sales Est Sales Forecast
Y14 Gr/LY Y15 Gr/LY Y16 Gr/LY
Jan 7,600 26.7% 8,900 17.1% 9,835 10.5%
Feb 7,700 24.2% 9,000 16.9% 9,965 10.7%
Mar 7,900 23.4% 9,200 16.5% 10,223 11.1%
Apr 8,000 23.1% 8,000 0.0% 10,353 29.4%
May 8,000 19.4% 8,000 0.0% 10,353 29.4%
Jun 8,100 19.1% 7,600 -6.2% 10,482 37.9%
Jul 8,200 17.1% 7,600 -7.3% 10,612 39.6%
Aug 8,300 15.3% 7,900 -4.8% 10,741 36.0%
Sep 8,500 16.4% 9,897 16.4% 11,000 11.1%
Oct 8,600 14.7% 9,861 14.7% 11,129 12.9%
Nov 8,600 14.7% 9,861 14.7% 11,129 12.9%
Dec 8,800 15.8% 10,189 15.8% 11,388 11.8%
Total 98,300 18.9% 106,009 7.8% 127,211 20.0%
Avg
8,192 18.9% 13,251 61.8% 15,901 12.5%
Cap
utiliz 53.0% 63.6%

Growth Estimated Est. 2106

2013 2014 Est. Gr
% 2015 Growth forecast
8270 9830 127,
18.9% 106,009 7.8% 20%
0 0 211

 XYZ company should take a strategic decision to re-grow the sales in Egyptian
market and to expand their sales in Africa and Middle East to utilize the available
production capacity and gradually increase every year.Production process
Key Approaches
Draw a flow chart for complete production process of a batch manufacturing and identify the
each step and find the solution to resolve the ley issues of production area.

Cleaning the reactor and ensure continuous flow of Alkyd resin is ready kept in stock
nitrogen in pipelines (Avg. 20Min) and directly send to customer

Start
Start charging
charging soya
soya bean
bean oil
oil and
and Transfer the resin to another tank and
adding a catalyst (LiOH) (Avg. add the solvent (Avg. 5 Min)
25 Min)
Start measuring acid value (A.V) & viscosity
every hour till reaching an A.V value of 8mg
KOH /g. Takes from 5 to 7 hours;
 XYZ current production process for long Alkyd resin are as follow:

Heat the mixture to 180̊C (Avg. 1:30 hour)

Add pentaerythritol (PENTA) (Avg.

20 Min) Continue heating to reach a Start cooling the mixture at 150 ̊C (2- 3 hour)
temperature of 250 ̊C (Avg. 1:30
hour)

Add phthalicanhydride and

maleic anhydride to the
cool down the mixture to180 ̊C (Avg. 1:30 hour) Re-heat the mixture (Avg.( 30
mixture 2 hour)
Min)

Wait until monoglyceride formation

is prepared (1 tp 3 hours)
Production Key Issues
XYZ is using batch processing that provides high volume and flexibility to customized
individual orders. The production process of paints requires long time because process includes
heating and cooling at various levels. The time required to manufacture a batch of paints is
significant. Currently a batch is produced approximately total 1,120 minutes equal to 18.6 hours.
Major time is consumed in measuring acid value (A.V) & viscosity every hour till reaching an
A.V value of 8mg KOH /g. Takes from 5 to 7 hours; although for healthy operations, this should
take 3 ± 0.5 hours on average. Viscosity is not measure after cooling the mixture at temperature
150 ̊C.