WILKINS,A ZURN COMPANY

Demand Forecasting

Gaurav Jain(FT11125)

GROUP 9
Vaishali Singh (FT11370)
Kiran Muley (FT11425)
Nirmaan Parekh (FT11436)
Porag Dutta (FT11438)
Pravin Patil (FT11440)
Rachna Saini(FT11443)
Vanshika (FT11471)
The Case
 Problem
◦ Identification of a forecasting techniques which can
predict the demand for existing and new products.
 Issues
◦ Ease of using forecasting process
◦ Reliability of the sales forecast
◦ Impact of occasional price promotions
◦ Use of economic information to facilitate forecasts
◦ Methods to forecast demand of new product
Approach
 Wilkins deals in two products PVB and fire
valves, the two products have distinct
demand patterns and hence their forecasting
methods should be different.
Demand Pattern for PVB Demand Pattern for Fire Valve
140,000 700

120,000 600

100,000 500

80,000 400

60,000 300

40,000 200

20,000 100

0 0
1 2 3 4 5 6 7 8 9 10 111213 14 1516 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Forecasting for PVB valve
 The demand data for PVB valve displays trend
and seasonality so we use Winter’s model
(Trend and seasonality corrected exponential
smoothing) to forecast future demand.
 Summary of results

◦ Forecast for 1st Quarter’2005 = 45,182 units ,

current forecasting methods yield forecast value of
53,560 units. Actual sales = 48,159 units
◦ MAD = 3,346 units, MAPE = 5.33
 Forecasting for PVB valve
140,000

120,000

100,000

80,000
Demand
60,000 Forecast

40,000

20,000

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Graph of demand v/s forecast using winters model

Forecasting for Fire valves
Standard Deviation
S.N Forecasting Method MAD MAPE of forecast error
1 Three Period Moving Average 105 27% 128
2 Four Period Moving Average 102 26% 128
3 Weighted Avg. 1 97 27% 122
(70%,20% and 10%)
4 Weighted Avg. 2 101 26% 122
(50%,30% and 20%)
5 Holts Model 93 24% 118

Summary of results
By using holt’s model - Forecast for 1st Quarter’2005 = 310
units ,current forecasting methods yield forecast value of 559
units. Actual sales = 580 units
MAD = 93 units, MAPE = 24 %
Forecasting for Fire valve
700

600

500

400
Demand
300 Forecast

200

100

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Graph of demand v/s forecast using holts model

Analysis using causal forecasting
 Product – Fire Valves
 Dependent Variable – Quarterly sales
 Predictor Variables

◦ Unemployment Rate
◦ Bank Prime Loan Rate
◦ Housing starts
Regression Analysis
 Results of regression Analysis
◦ Regression between Quarterly sales and Unemployment Rate
 R2 = 0.35
 Adjusted R2 = 0.29
◦ Regression between Quarterly sales and Bank Prime Loan Rate
 R2 = 0.09
 Adjusted R2 = 0.00
◦ Regression between Quarterly sales and Housing starts
 R2 = 0.10
 Adjusted R2 = 0.02

 The values of R2 tells us that the percentage of fluctuation in the

dependent variable, Quarterly sales explained by the predictor
variables - Unemployment Rate, Bank Prime Loan Rate and
Housing starts is low hence we discard causal forecasting for
predicting demand of fire valves.
Regression Analysis
 The minimum sample size data required for
conducting regression analysis is 25, since the
regression was conducted on sample size of 13,
the relationship between the dependent variable
and predictor variables needs to be re-checked
 Relationship with other predictor variables such as
advertising expense, price promotions and other
economic indicators should be established to check
if they account for fluctuation in the dependent
variable, Quarterly sales.
Summary
 Winter’s model (Trend and seasonality corrected
exponential smoothing) is appropriate to forecast PVB
valves
 The values of a & b should be modified at specified
intervals to represent the actual trend and seasonality
effects when error increases.
 The values of a & b should be modified during
discounts, moreover causal elements should be taken
into consideration to avoid bull whip effect.
 Qualitative methods should be used along with time
series or causal forecasting for predicting demand for
new products, in this case the fire valves.
Thank You