North South University

Course Code: BUS650

Section 01
Fall 2018

Course Instructor: Dr. Abdullahil Azeem (ADZ)

Analysis of Sales Forecast & Production Planning Process of YELLOW

Submitted By: Group-04

NAME ID
Shihab Uddin 162 1561 060
Redwan Walid 172 5166 660
Mehryn Murshed 151 2966 660
Nelufar Yasmine 171 5361 660
Md. Salauddin Dinar 153 1461 660
Executive summary
BEXIMCO is one of the largest groups in Bangladesh and highest GDP contributor. The report is
on one of its concern, YELLOW by BEXIMCO Textile Division. Yellow has large retail store and
has factory with all the facilities for composite yarn. The production process runs from making
yarn to fabric and from fabric to finished garments. Since globalization is the new trend for being
competitive, Yellow plans to global as well.

Yellow needs to ensure that from the beginning proper sales forecast is done and based on that
proper production plan is made to execute and achieve target sales. Especially the production plan
involving capacity plan and raw material plan need to give long term focus to ensure that
production capacity and raw material plan is align with long term growth of the company. Given
current situation Yellow is facing issues regarding long term production capacity plan, fixed
production partners and quality raw material source. All these are hindering to make proper sales
forecast and to execute sales plan accordingly to achieve sales, profit and customer satisfaction.

They need to make sure they have proper capacity plan, raw material plan, and good source of
qualitative raw material with competitive cost, flexible production capacity, and proper research
for product development. If they can ensure all these points they can surely have rapid growth in
the market. But to do so they need to heavily invest on training the human resources and developing
an integrated production plan.
Contents
Executive summary ....................................................................................................................................... 2
Background of the Company - Yellow ......................................................................................................... 4
Objectives of the Study: ................................................................................................................................ 5
Methodology: ................................................................................................................................................ 5
Data Collection ............................................................................................................................................. 6
Primary Data- ........................................................................................................................................ 6
Secondary Data- .................................................................................................................................... 7
Data filtration and analysis- ...................................................................................................................... 7
Sales Forecasting Process of Yellow ............................................................................................................ 8
Application of Different Forecasting Techniques:.................................................................................... 8
Simple Moving Average Method.......................................................................................................... 8
Weighted Moving Average Method ..................................................................................................... 9
Simple Exponential Smoothing Method ............................................................................................. 10
Production planning Process of Yellow ...................................................................................................... 11
Merchandising- ....................................................................................................................................... 11
Production planning-............................................................................................................................... 11
Master production schedule (MPS)..................................................................................................... 12
Manufacturing resource planning (MRP II) ........................................................................................ 12
Advanced planning and scheduling (APS) ......................................................................................... 12
Product Planning ......................................................................................................................................... 12
Capacity planning: .................................................................................................................................. 13
Problems faced by Yellow for Sales Forecast ............................................................................................ 13
Problems faced by Yellow in Production Planning .................................................................................... 15
Actions to Improve Sales Forecast and Production Planning ..................................................................... 15
Conclusion .................................................................................................................................................. 17
References ................................................................................................................................................... 18
Background of the Company - Yellow
BEXIMCO Group is one of the largest local conglomerates in Bangladesh. BEXIMCO was
founded in the 1970‘s by two brothers – Ahmed Sohail Fasiur Rahman and Ahmed Salman Fazlur
Rahman. Since the early days, the Group has evolved from being primarily a commodities trading
company to a leading, diversified group with a presence in industry sectors that account for nearly
75% of Bangladesh‘s GDP. BEXIMCO‘s corporate mission is “Taking Bangladesh to the World”.
BEXIMCO encompasses one of South Asia‘s largest vertically integrated textile and garment
companies. The Textile division is a fully integrated manufacturer of cotton and polyester blended
garments for men, women and children, both for domestic and export markets. The Group‘s global
clients include some of the world‘s best known brands including BT, BASF, Chevron, Calvin
Klein, H&M, JC Penney, Macys, Zara, UNICEF, Royal Doulton and Villeroy & Boch.

Over the years, BEXIMCO has developed in-house design capabilities with teams based in
Bangladesh and Spain. Furthermore it has partnered with some of the world‘s renowned design
institutes, including Fashion Institute of Technology, Parsons, London School of Fashions, NIFT
and NID, for access to talented designers. The Group has built strong working relationships with
its core clients through a continuous dialogue. The Group's technology partners include Invista,
Huntsman, CHT, Rudof and Clariant. Key clients include American Eagle, Arcadia Group, Calvin
Klein, H&M, JC Penney, Macy's, Tommy Hilfiger, Warnaco and Zara. The Group is planning to
expand the textiles business through capacity additions. Post expansion, the annual capacity of knit
fabric is expected to increase to 80 million lbs from 11 million lbs currently and the annual capacity
of apparel knits is expected to reach 145 million pieces from 20 million pieces currently
(Assignment Point, 2018)

The Group is also present in retail apparel through ―Yellow, a youthful brand sold through
BEXIMCO owned outlets. Yellow is a design driven brand that celebrates creative and original
thinking to highlight a lighthearted and optimistic view of life through a superior quality product.
Yellow captures a modern interpretation of fashion and relaxed attitude expresses a comfortable
and confident quality. The adventurous spirit of the line is built from BEXIMCO Group's heritage
in innovation and living a life full of passion that is open to discovery. Yellow is inspired by its
customers; Unconventional yet high-quality (KHAN, 2015).
YELLOW, the trendiest fashion brand from Bangladesh, is mostly distinguished for its true
international quality designs and fabrics. As a retailer of the parent brand BEXIMCO, YELLOW
started the journey in 2004 and have 19 stores across Bangladesh and Pakistan and 24/7 online
store. YELLOW is inspired by the customers- souls full of unconventional fashion senses. Since
origin, YELLOW has been offering world class designs at amazing value price. The product line
includes a wide range of fashion clothing, fragrance, and accessories for men, women and children;
textiles for home decoration; avant-garde ceramic items; paintings; books; and many more
(YELLOW, 2018)

They manufacture everything from yarn to fabric to garments in their own factories. Since the
company has in house laundry, printing, embroidery and lab it can make garments for the retail
market in a very cost efficient manner and sell at an affordable price range. The stores offer a truly
international shopping experience with well-designed spaces. Yellow plans to open stores in South
East Asia, The Middle East & Europe

Objectives of the Study:

• Identify principles of forecasting
• Describe the time series and causal models
• Generate forecasts for data with different patterns: level, trend, seasonality, and cyclic
• Describe causal modeling using linear regression
• Determine forecast using moving average, weighted moving average, and exponential
smoothing

Methodology:
The research is formal study research based on primary and secondary data. The research started
with a literature review to uncover the issues involved.

The study utilized primary and secondary data related to Yellow and Retail Clothing industry
which are collected from the websites, annual reports of different retails companies, research
papers, magazines, relevant books, newspapers, journal and other relevant documents.
The report will be prepared in a 3-step process. The steps are as follows:

• Data collection
• Data filtration and analysis
• Findings and action plan

Data Collection
As our purpose is to forecast sales and forecasting method as well as how this is linked to operation
management (supply chain) and what are the process involve.

Primary Data-
We have talked to few employees of Yellow for primary information. In order to have good sales
and make forecast we need to know each activity, process, and lead time from product
development to sales generation.

To collect the relevant data we covered the below mentioned sectors

Merchandising:

• Sales forecast and Plan

• Inventory Plan

Development:

• Product development concept

• Development Lead time.

Production:

• Production Plan
• General Lead time for production
• Material source and Lead Time
• Quick Response Lead Time to adjust with sales.

Sales & Store:

• Sales Support and provide information to Merchandising team

• Customer feedback
Secondary Data-
For secondary data we used mainly Annual report of Beximco. Also we have taken help from
article, websites and other related sites.

Data filtration and analysis-

Based on the primary and secondary data; we analysis below points.

• Demand Forecast
• Seasonality
• Marketing spend
• Market shifts.
• Competition.
• Production forecast
• Production plan, Scheduling.
• Engagement between departments

In order to maximize sales revenue and profits, a business firm must continuously adjust and adapt
its products and services to the changing requirements of customers. From time to time, it may
have to design and develop new products. Product planning is the process of searching ideas for
new products, screening them systematically, converting them into tangible products and
introducing the new product in the market. It also involves the formation of product policies and
strategies. Product planning includes improvements in existing products as well as deletion of
unprofitable or marginal products. It also encompasses product design and engineering which is
also called product development. Product planning comprises all activities starting with the
conception of product idea and ending up with full scale introduction of the product in the market.
It is a complex process requiring effective coordination between different departments of the firm.
It is intimately related with technical operations of the organization, particularly with engineering,
research and development departments. Any product has two broad objectives—immediate
objectives and ultimate objectives. Immediate objectives include satisfaction of immediate needs
of consumers, increasing sales, utilizing idle plant capacity, etc. Permanent or ultimate objectives
consist of reduction in production costs, creation of brand loyalty, monopolizing the market, etc.
Sales Forecasting Process of Yellow
Sales are the lifeblood of a business. It's what helps you pay employees, cover operating expenses,
buy more inventory, market new products and attract more investors. Sales forecasting is a crucial
part of the financial planning of a business. It's a self-assessment tool that uses past and current
sales statistics to intelligently predict future performance. To estimate sales of Yellow, have to
analyze below information first:

• Historical Data
• Demand and Sales variability pattern
• Market an Industry pattern
• R&D information
• Customer, Manufacturing, store feedback

Application of Different Forecasting Techniques:

Simple Moving Average Method

When demand for a product is neither growing nor declining quickly and if it doesn’t have seasonal
characteristics, a moving average is helpful in removing the random fluctuations for forecasting.
However moving averages are frequently targeted, it's additional convenient to use past
information to predict the subsequent amount directly. Although it is necessary to pick out the
simplest amount for the moving average there are many conflicting effects of various amount
lengths. The different moving averages produce different forecasts. The larger the quantity of
periods within the moving average, the larger the smoothing result. If the underlying trend of the
past information is assumed to be fairly constant with substantial randomness, then a larger range
of periods ought to be chosen.

A
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i
Ft 
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 Yellow Yearly Sales Data, 2018
CLS = Casual Shirt

Actual
Sl. Period Months QTY Sent to Store Sold QTY
1 Spring March'18-May'18 9,100 7,735
2 Summer June'18-Aug'18 14,050 12,786
3 Autumn Sept'18-Nov'18 7,910 4,588
4 Winter Dec'18-Feb'19 8,087 5,095
F5 = Average 7,551

Simple Moving Average Method Forecasting

2019

Period Months Forecasted QTY

Spring March'19-May'19 7,551

Weighted Moving Average Method

In the simple moving average every observation is weighted equally. For instance, in a very three-
period moving average every observation weighted one-third. In a very five-period moving
average each observation is weighted simple fraction. Typically a manager desires to use a moving
average however offers higher or lower weights to some observations based on knowledge of the
industry. This is often known as a weighted moving average. In a very weighted moving average,
each observation is weighted differently as long as all the weights add up to 1.

Yellow Yearly Sales Data, 2018

CLS = Casual Shirt

Actual
Sl. Period Months Weight QTY Sent to Store Sold QTY
1 Spring March'18-May'18 0.1 9,100 7,735
2 Summer June'18-Aug'18 0.2 14,050 12,786
3 Autumn Sept'18-Nov'18 0.3 7,910 4,588
4 Winter Dec'18-Feb'19 0.4 8,087 5,095
F5 = Weighted
6,745
Average

Weighted Moving Average Method Forecasting 2019

Period Months Forecasted QTY

Spring March'19-May'19 6,745
Simple Exponential Smoothing Method
In the previous forecasting methodology, the most important drawback is the need to regularly
carry an oversized quantity of historical knowledge. As each new piece of data is added in these
methods, the oldest observation is dropped, and the new forecast is calculated. The reason this is
called exponential smoothing is that each increment in the pasts decreased by (1-α). This method
provides short term forecasts. The simplest formula is,

New forecast = Old forecast + α (Latest Observation – Old Forecast)

Or more mathematically, Ft = Ft-1 + α (At-1 –Ft-1).

Where,

F1 = the exponentially smoothed forecast for period t,

Ft-1 = the exponentially smoothed forecast made for the prior period,

At-1 = the actual demand in the prior period,

α = the desired response rate, or smoothing constant.

Yellow Yearly Sales Data, 2018

CLS = Casual Shirt

Actual
Sl. Period Months Weight QTY Sent to Store Sold QTY Forecasted
1 Spring March'18-May'18 0.1 9,100 7,735
2 Summer June'18-Aug'18 0.2 14,050 12,786
3 Autumn Sept'18-Nov'18 0.3 7,910 4,588
4 Winter Dec'18-Feb'19 0.4 8,087 5,095 5,500
F5 = Simple
5,459
Moving Average

Weighted Moving Average Method Forecasting 2019

Period Months Forecasted QTY

Spring March'19-May'19 5,459
Production planning Process of Yellow
For efficient, effective and economical operation in a manufacturing unit of an organization, it is
essential to integrate the production planning and control system. Production planning and
subsequent production control follow adaption of product design and finalization of a production
process. Production planning is an activity that is performed before the actual production process
takes place. It involves determining the schedule of production, sequence of operations, economic
batch quantities, and also the dispatching priorities for sequencing of jobs. Production control is
mainly involved in implementing production schedules and is the corollary to short-term
production planning or scheduling. Production control includes initiating production, dispatching
items, progressing and then finally reporting back to production planning. In general terms,
production planning means planning of the work to be done later and production control refers to
working out or the implementation of the plan

Merchandising-
Merchandisers play a vital role in the product creation process, from design through production.
They communicate closely with many other departments before determining the planning, design,
materials and marketing approaches required to satisfy predetermined seasonal concepts.
Merchandisers decide product lineups and production volumes for the fall, winter, spring and
summer seasons. Merchandisers also closely monitor sales levels and decide whether to increase
or reduce production for particular items during a season. Based on the merchandising sales
planning production planning and production team makes the aggregated production plan.

Production planning-
Based on the sales plan production planning team is responsible to make the production plan for
each product. In order to do so production planning team considered below points to make
adjustable production plan.

• Capacity of each factories

• Capability of each factories.
• Lead Time of Fabric and other raw materials
• Coefficient of each item.

Based on this above information sales team divided the production plan into 3 phase.
Phase 1: In phase initial order quantity is planned. This is around 30%~40% of the total plan. This
plan is to basically catch the initial sales of the stores.

Phase 2: This is the second stage around 30%~40% of the total sales plan. This production plan is
done in a way to make sure that after initial sales start SKU can be adjusted to some extent.

Phase 3: This is the final phase around 30%~40% of the sales. This is where production plan is
adjusted based on sales plan. Even production can be stopped if sales is bad.

Master production schedule (MPS)

This is a plan for individual commodities to be produced in each time period such as production,
staffing, inventory, etc. It is usually linked to manufacturing where the plan indicates when and
how much of each product will be demanded. This plan quantifies significant processes, parts, and
other resources in order to optimize production, to identify bottlenecks, and to anticipate needs
and completed goods. The Yellow production team directly work with factories to make sure
master production

Manufacturing resource planning (MRP II)

This is defined as a method for the effective planning of all resources of a manufacturing company.
Ideally, it addresses operational planning in units, financial planning. Yellow system called Global
one is used by the factory to give different inputs about process, efficiency, and output and from
where both parties can see the result and take actions.

Advanced planning and scheduling (APS)

Refers to a manufacturing management process by which raw materials and production capacity
are optimally allocated to meet demand. APS is especially well-suited to environments where
simpler planning methods cannot adequately address complex trade-offs between competing
priorities. Yellow evaluate all factories CAPA, lead time of each material, logistics lead time based
on demand. Based on this planning team makes plan for the whole season depends on products for
6 months to 1 year.

Product Planning
Item Planning lets you build plan by item, key item, or assortment—by vendor, class or item
attribute—and across multiple sales channels. With Item Planning you can plan and forecast sales
and inventory requirements in line with changes in demand to maximize margin potential for key
items at every stage of the product lifecycle.‖-Manhattan Associates Our Item Planning solution
also focuses on powerful attribute planning capabilities that make it easy to incorporate attributes
into your planning process and explore ―what if‖ planning scenarios to weigh the benefits of
different strategies based on customer preferences, market demand changes. Retailers can
determine the optimum product mix across the attributes that matter most to customers. This
approach improves sales, turn and inventory management by putting customer preferences in sync
with financial targets.

Item Planning is a flexible, easy-to-use solution that allows you to:

• Micro-manage your key items that contribute the most profit to your business
• Improve forecast accuracy at item level with built in integration to Demand Forecasting
solution
• Use attribute planning to gain visibility into customer preferences and react quickly to their
changing needs
• Execute assortment plans to get the right product, at the right price, in the right locations
at the right time
• Rapidly respond to changes in demand and align inventory accordingly to increase sales,
margin and sell through.

Capacity planning:
This is the process of determining the production capacity needed by an organization to meet
changing demands for its products. Based on the sales plan production plan is made after
considering each factory capacity also capacity for each individual item is also considered. When
planning capacity it is ensured that factory can run smoothly without line gap and make sure there
is no deviation more than 20% of the planned capacity.

Problems faced by Yellow for Sales Forecast

Sales forecast is considered as the single most important factor in the indication of business
performance. An accurate sales forecast would let Yellow anticipate the revenue flow and keep costs
in line with income. However, Yellow faced the following problems regarding the sales forecast:

• Lack of Qualitative Analysis: When doing sales forecast Yellow focuses more on quantitative
analysis rather than also considering qualitative analysis. In a market like Bangladesh
 qualitative data is very important to consider sales plan provided the number of competitors in
the market is so high.
• Depending on Instincts to Dictate Sales Forecast: With more than 14 years of experience,
Yellow has bene relying on gut feelings of the management and this is not necessarily the
trustworthy indicator of sales performance. Feelings and intuitions, whether positive or
negative, are ultimately guess work as they are not based on measurable data and genuine
customer behavior. Undoubtedly, there is no guarantee of a forecast to be fully accurate but
predictions derived from trends and actual data will always outpace one based on emotional
indicators and hunches.

• Not Specifying and Managing Sales Stages Efficiently: Sales Forecasting needs to have a
pipeline with stages. Deals move through various stages from qualification to evaluation to
closing. Sales teams must understand these stages clearly and know how to keep each stage
filled with deals and also make sure that deals move from stage to stage on a regular basis. The
problem occurs when leads do not move properly through these stages and you are not able to
accurately predict the customer’s readiness to buy. Ensure that the sales pipeline doesn’t get
clogged due to inefficiency in defining the stages meticulously. Make use of a good CRM
system to avoid these circumstances and ensure that the forecasting process is more transparent
and efficient.
• Tackling Variance in Sales Volume: An organization’s sales figure is highly dynamic and
reliant on on a large number of factors such as economic, political, cultural, and legal factors.
It can be challenging to accurately estimate the sales volume as such factors completely disrupt
the historical pattern. Yellow’s response to sales disparity is less. This is essentially more rated
to production planning issue than sales planning.
• Assumed Consistent Quarters and Sales Cycles: Sometimes merchandisers are too fixated
on specific time period and sales cycles which ultimately results in sales loss. Some items
which can be sold all the year round such as Panjabi are rather focused on seasonal basis.
• Assuming Discounts and Incentives will Quicken Buyer’s Decision
Throughout the year Yellow offers heavy discounts to buyers to get them buy their products.
However, price is not the only factor a buyer would consider when making a purchase. Yellow
misses the fact that they need to get deeper in to the sales cycle and nurture them and never try
to close the deal too early.
Problems faced by Yellow in Production Planning
In a company like Yellow, production is the driving force to which most other functions react. The
ultimate objective of production planning is to contribute to the profit of the organization a by
keeping the customers pleased through the meeting of delivery schedules. Yellow has faced some
the below problems in production planning:
• Capacity Constraints: The main challenge Yellow team faces during production planning
their workstation on the production line with the capacity issue of running the line. This reduces
the effective capacity of the entire line. In the capacity planning other bottlenecks include the
infrastructure of their factory
• Unable to adjust production plan based on sales: As there is uncertain lead time for raw
materials and production, it is almost impossible to adjust production plan based on sales result.
• Long Lead Time: The lead time for development and raw material is long. Which also creates
hard to sales plan and production plan to match sales.
• Standard Process Sheet: The process owner sourcing the basic data in the production line
includes the type of machine to be used, time required for processing. When there is a machine
breakdown, the standard process sheet is effected, increasing the time for final output.
• Scheduling difficulties: All above issues are linked and are interdependent. As a result these
create problem for scheduling and can affect the critical activities which cannot have any slack
time.

Actions to Improve Sales Forecast and Production Planning

To improve the operations management of Yellow, the management needs to take some actions to
improve the sales forecast and production planning. The following are the recommendations for Yellow
to ensure proper sales forecast and production plan:

• Market and Industry knowledge: Yellow needs to be more vigilant and do more research on
the market and industry as a whole to have more knowledge of the trend to do accurate sales
forecast. Yellow, being in the fashion industry, should be aware that fashion changes rapidly.
Therefore they need to keep pace and be aware of every new trend. Yellow should be able to
capture the new trends faster and implement better.
• Estimating Forecast for New Products: The trend in Bangladesh is that the country is
adopting the Western culture faster. Yellow should be able to predict this and bring in the
Western culture, for example, faster than the competitors in the fashion industry. The historical
data for such trends needs to be analysed as well.
• Lack of Qualitative Analysis: Need to take consideration of qualitative data more. The
psychological reaction of customers for the products being sold by Yellow needs to be
considered. Survey regarding the end-user satisfaction needs to be undertaken to bring in
necessary changes.
• Tackling Variance in Sales Volume: Need to analysis the seasonal sales variation when doing
sales forecast. The industry where Yellow belongs undergoes the highest seasonal trends and
this must be reflected in their collection and orders must be planned accordingly.
• Assumed Consistent Quarters and Sales Cycles: Yellow needs to evaluate each item
whether it can be sold round year or not especially for basic items. Not to constraints before
doing proper research about the item.
• Capacity Constraints: Yellow requires to have proper plan to build and fix capacity for long
term. As capacity cannot be built immediately it is necessary to have long term plan along with
long term growth plan.
• Quality Raw Material: Since Yellow uses their own fabric in most cases, they need to make
sure other quality raw materials which are sourced, like buttons, zippers, etc, are of superior
quality which will improve efficiency and cost advantage. The quality assurance department
needs to be vigilant regarding the quality check.
• Adjustable production plan based on sales: The production plan needs to be made in a
flexible with the sales volume. This way the demand cycles can be me. However, for this it is
necessary to have proper capacity plan and raw material plan.
• Shorter Lead Time: With proper capacity, raw material plans the company needs to ensure
short lead time for product development and production. All the above action points, if taken
under consideration, the optimum structure would be like the figure below:
 Figure: Optimum Plan considering the improvement actionable

Conclusion
Yellow is operating in a growing market with a lot of opportunities. It has the potential of capturing a
bigger market share given its infrastructure and management. But for that they need to make sure they
have proper capacity plan, raw material plan, and good source of qualitative raw material with
competitive cost, flexible production capacity, and proper research for product development. It is
important to note that sales forecasts, when used correctly, are a hugely powerful weapon for sales
managers. The critical factors are sometimes ignored to come up with an overly optimistic sales
forecast. But, all these factors need to be addressed to have a realistic sales forecast. Simultaneously,
the production plan needs to be implemented which will be able to satisfy the forecasted demand in
the right place and in the right time. If they can ensure all these points they can surely have rapid
growth in the market. It is recommended that Yellow invests heavily on training their human resources,
on their research and development function and on creating an integrated production plan.
References
Assignment Point. (2018). Financial Performance Evolution of Yellow by Beximco. Dhaka: Assignment
Point.
KHAN, T. N. (2015). REPORT ON PRODUCT PLANNING IN YELLOW’S RETAIL STORES. Dhaka.
YELLOW. (2018, November). Retrieved from YELLOW | The Most Innovative Clothing Brand in
Bangladesh | A BEXIMCO Concern: https://www.yellowclothing.net/-4-about-yellow
V.D.R. Guide, Volume 11 (2000) R. Shiverasta, “A review of techniques for buffering against uncertainty
with MRP systems”, Production Planning and Control