Forecasting Analytics

Group members:
- Arpita
- Kapil
- Kaushik
- Ridhima
- Ushhan
 Business Problem

Forecast daily sales of dairy products (excluding milk) to make a

good prediction of future demand, and predict the stock level
required to meet the demand.
Evaluate different forecasting methods on data distribution and
forecast period, and pick the best one based on the results.

Dairy
Products

Ice
Cream Lassi Srikhand

Cups & Family Family Family

Cones Packs Packs Packs

Forecasting Analysis
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 Ice Cream & Gelato Analysis & Forecast

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 Ice Cream Sales (2011 12)

31st March

A day before
Raksha Bnadhan
1 days before
Mahavir Jayanti
Good Friday
Budha Purnima
2 days before Valentines day
Gandhi Muharram
Jayanti

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 Data Visualization- Sales

Distribution Across
subclasses

Cups & Cones - Monthly

Week day seasonality

Family Pack - Monthly

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 Analysis & Forecast Sales ( Cups and Cones )

Regression Moving Holts

( Single Average Winter
Seasonality) Method Method

MAPE 0.89 MAPE 0.58 MAPE 0.69

RMSE 13.22 RMSE 16.46 RMSE 8.75

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 Analysis & Forecast Sales ( Cups and Cones -
Continued)
Regression Polynomial Trend and Multiple Seasonality ( Weekly and Half Yearly)

The Regression Model

Input variables Coefficient Std. Error p-value SS

Constant term 11.43823338 2.29202032 0.00000094 87293.44531
t 0.07057966 0.02275607 0.0020786 1976.065308
t ^2 -0.00017919 0.00006641 0.00730373 43.97101974
day of week_2 -5.56998158 2.0351541 0.00651356 139.6604157
day of week_3 -5.55328846 2.03511047 0.00667317 196.7801056
day of week_4 -4.37169743 2.04480267 0.03320085 51.11870575
day of week_5 -6.26070452 2.0447247 0.00236676 629.9749756
day of week_6 -3.29685378 2.0446682 0.10775778 89.6808548
day of week_7 -3.32565784 2.04463482 0.10472196 284.4305725
month of year_1 6.26655626 1.61968482 0.00012995 1627.033813

Training Data scoring - Summary Report

Total sum of Average

RMS Error
squared errors Error

38694.54028 10.28215871 -0.0001072

Validation Data scoring - Summary Report

Total sum of Average MAPE improved

RMS Error MAPE
squared errors Error

5471.241832 13.28501682 3.254043135 0.55182345

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 Lassi & Srikhand

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 Data Visualization-Weekly Demand

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 Daily Quantity Sold Data

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 Correlation between daily sales

ACF Plot for Sum of Quantity_Sold

1

ACF 0.5

0
0 1 2 3 4 5 6 7

-0.5

-1
Lags

ACF UCI LCI

Next day related to the previous day and a week before

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 Nave Forecast
ACF Plot for Residual
1

0.5

ACF
0
MAPE 0 1 2 3 4 5 6 7

130%
-0.5

-1
Lags

ACF UCI LCI

Negative correlation between a day's sales and sales previous day? Using Nave
we are just taking previous day and forecasting but it seems lot of signal is not
captured
It says that nave forecasting model is not able to explain

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 Forecast using Multiple Regression
Input variables Coefficient Std. Error p-value SS
406.079040 203580.109
Constant term -1936.91626 0.00000276
5 4
7851.68261
Row Labels 0.04776152 0.00991758 0.00000222
7
4072.53735
Weekday_Mon -2.3526628 3.8025558 0.53654903
4
342.777923
Weekday_Sat 9.82291985 3.802526 0.01022904
6
24514.2578
Weekday_Sun 26.75549126 3.82146454 0
1
456.080169
Weekday_Thu 4.24133205 3.88327575 0.27556217
7
535.565490
Weekday_Tue -2.26675916 3.92769527 0.56426156
7
373.083984
Weekday_Wed 4.0734067 3.92513132 0.30015546
4

Residual df 321
Multiple R-squared 0.255420386
Std. Dev. estimate 18.61228561
Residual SS 111199.9063

Training Data scoring - Summary Report

Total sum of squared
RMS Error Average Error
MAPE: 133% errors
111199.9052 18.38460315 -6.71529E-06

Validation Data scoring - Summary Report

Total sum of squared
RMS Error Average Error
errors
9126.699565 18.05418389 -11.31025751

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 ACF & PACF with Multiple Regression

ACF Plot for Residual PACF Plot for Residual

1 1

0.5 0.5

PACF
0
ACF

0
1 2 3 4 5 6 7
0 1 2 3 4 5 6 7
-0.5
-0.5

-1
Lags
-1
Lags
PACF UCI LCI
ACF UCI LCI

Regression model tells us that next days

sales are dependent on last two days
sales along with regular time component

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 Smoothing Moving Average(7)
Time Plot of Actual Vs Forecast (Training Data)
Time Plot of Actual Vs Forecast (Validation Data)
160
70
140
60

Sum of Quantity_Sold
120
Sum of Quantity_Sold

50
100
40
80
30
60
20
40
10
20
0
0

Row Labels
Row Labels
Actual Forecast
Actual Forecast

Error Measures (Training) Error Measures (Validation)

MAPE 128.55637 MAPE 241.73763
MAD 17.43578 MAD 27.321429
MSE 605.26376 MSE 866.89286

Shows strong correlation between days sales with last 2 days

It also tells that moving average could be used in roll forward manner

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 Holt Winter Forecasting Method-Additive

Error Measures (Training) Error Measures (Validation)

MAPE 121.54953 MAPE 56.46093

MAD 15.887538 MAD 18.750176
MSE 494.58883 MSE 367.86672

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 Moving Average (MA2)

MAPE 123.82985 MAPE 48.290598

MAD 16.119131 MAD 16.5
MSE 513.18213 MSE 308.25

Model Fits quite well but can only forecast

for next 1-2 days

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 Holt Winter Smoothing-Additive

Error Measures (Training) Error Measures (Validation)

MAPE 125.72335 MAPE 48.290598

MAD 17.082153 MAD 16.5
MSE 577.27479 MSE 308.25

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 Conclusions & Suggestions

Different in forecasting methods used for effective

forecast
Recommendations to Business
Stock level on weekly or monthly basis can be
predicted for dairy products.
ERP system that could directly tell the vendor how
much to deliver
Model is useful to predict for next day given previous
two days sales, need to implement roll forward

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 THANK YOU

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