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OPERATIONS RESEARCH

CASE ANALYSIS
FORECASTING SALES
FOR VINTAGE
RESTAURANT

Submitted By:
GROUP 12
Maneesh Gondesi (15)
Aritra Guha (16)
Sravya Jayanti (21)
Prakhar Raj (45)
Saurabh Sharma (53)
Of PGDM-B 2016-18
OBJECTIVE
To perform an analysis of the sales data for the Vintage
Restaurant and prepare a report for Karen that
summarizes our findings, forecasts, and
recommendations.

ANALYSIS
a. Time-Series Analysis:

Sales($1000's)
300

250

200

150

100

50

Sales($1000's) Linear (Sales($1000's))

Figure 1: Sales($1000s) Over Three Years of Operation


From the time-series plot Figure 1, it is observed that the sales are neither
increasing nor decreasing following a straight trendline. Also, a
seasonal pattern is observed with sales dipping in the first three
quarters and then rising in the fourth quarter.
b. Analysis of seasonality of the data:
The seasonality index for each month is as follows:
MONTH SEASONALITY INDEX
January 1.42
February 1.28
March 1.31
April 1.01
May 1.02
June 0.78
July 0.81
August 0.83
September 0.61
October 0.69
November 0.84
December 1.14
Table 1: Seasonality Indices

The above table shows the seasonal indices for all the months. The month
in which the seasonal index recorded is highest is January with 1.42. The
least value of 0.61 is in September.
The objective of having seasonal indices is to remove seasonality from the
sales data through dividing the sales by the corresponding index. Here,
the seasonal indices are observed to follow a cyclic trend, i.e., decrease
gradually from January to September and increasing from October to
December. This is in line with the seasonalised sales trend. So upon
division, we get the deseasonalised data as under:

Deseasonalized Sales($1000's)
250.00

200.00 f(x) = 1.04x + 173.35


R = 0.92
150.00

100.00

50.00

0.00

Deseasonalized Sales($1000's) Linear (Deseasonalized Sales($1000's))

Figure 2: Deseasonalised Sales Over Three Years of Operation


Upon removing the seasonal component, we observe a linear trend in
sales as shown in Figure2. We can therefore apply trend analysis for
forecasting the sales for the next year.
c. Forecast of sales for January through December of the fourth
year:
DESEASONALIZED SALES
MONTH FORECAST ADJUSTED SALES FORECAST
January 211.85 300.61
February 212.9 271.76
March 213.94 281.02
April 214.98 217.17
May 216.02 220.57
June 217.06 168.71
July 218.1 176.05
August 219.14 182.47
Septemb
er 220.18 135.17
October 221.22 151.76
Novembe
r 222.26 185.98
Decembe
r 223.3 254.36
Table 2: Forecasted Sales for Fourth Year
The forecasted sales upon trend analysis are given in table 2.

Forecasted Sales for 4th Year


350.00

300.00

250.00

200.00

150.00

100.00

50.00

0.00
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Note: Adjusted sales forecast includes deseasonalised sales multiplied by


the seasonal index for the month. This is done to ensure consistency in
the forecasted sales by again introducing the seasonal component which
was removed during deseasonalisation.
d. Forecast error
Actual Sales = $ 295,000
Forecasted Sales = $ 300610
Forecast Error % = (Actual Sales Forecasted sales) *100 / Actual Sales
= (295,000 300610) * 100 / 295000
= - 1.90%
Note: Negative sign implies that the forecast model we developed over
predicted the sales for the particular month.
Hence, the forecast model employed had over predicted the sales for the
month of January by a value of $5610. Since the error percentage is only
about 1.9% Karen need not worry about the model as it is close to
providing the actual sales value.
e. Recommendations
The new sales data should be updated monthly in the forecasting model
developed so as to provide for better understanding of the future sales of
the product. Most businesses use monthly data only rather than quarterly
forecasts. Hence, we have already used a monthly data model by
calculating 12 monthly moving averages and their seasonal indices. So,
the model developed is in accordance with the business requirements.
The analysis can be easily updated every month if a computer software
package is used to perform the analysis.
f. Appendix
All calculations have been shown in the attached excel sheet along with
the generated graphs.