Period Time ABC 12_720 ABC 34_720 ABC 1-720 ABC 34-420 ABC 1-420

Jan-Mar 2001 1 2108 6716 10688 7158 842

Apr-Jun 2001 2 2516 11510 21688 7034 3050
Jul-Sep 2001 3 2954 18438 40814 9026 5736
Oct-Dec 2001 4 2224 10456 19510 7254 4414
Jan-Mar 2002 5 1788 9464 9824 6968 2536
Apr-Jun 2002 6 2512 12942 21848 9156 6740
Jul-Sep 2002 7 3540 21640 48936 8134 6454
Oct-Dec 2002 8 3666 11650 24640 6958 4676
Jan-Mar 2003 9 3546 11270 12400 5208 2948
Apr-Jun 2003 10 5596 15322 23692 6806 6424
Jul-Sep 2003 11 5948 19424 47904 10446 9666
Oct-Dec 2003 12 4892 13310 26990 7960 5754
Jan-Mar 2004 13 4311 10214 13851 7397 3609
Apr-Jun 2004 14 6637 20983 31507 9043 7049
Jul-Sep 2004 15 7823 27492 66644 11233 9676
Oct-Dec 2004 16 6652 19535 17337 7496 3976
Jan-Mar 2005 17
Apr-Jun 2005 18
Jul-Sep 2005 19
Oct-Dec 2005 20

Note:
Columns B, C, D, E & F are Sales for various SKU (Stock Keeping Units) for Product F
Column G indicates Aggregate Sales for the ABC Product Family
ABC is a Shower Faucet; Different SKUs are different designs for Shower Faucets

Case Question:

Create a demand forecast for the ABC product family for the next fo
Explain each step clearly.

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.289509707682
R Square 0.083815870842
Adjusted R Squar 0.018374147331
Standard Error 25546.36527994
Observations 16

ANOVA
df SS MS F Significance F
Regression 1 835852736.2 835852736.2 1.28077114 0.27676876304
Residual 14 9136634906 652616779
Total 15 9972487642

Coefficients Standard Error t Stat P-value Lower 95% Upper 95%

Intercept 1127.023753894 52202.31477 0.021589536 0.983080072 -110835.80604 113089.854
Unemployment Ra10824.76869159 9564.953398 1.131711598 0.276768763 -9690.01602711 31339.5534
SUMMARY OUTPUT

Regression Statistics
Multiple R 0.374949687648
R Square 0.140587268267
Adjusted R Squar 0.079200644572
Standard Error 24742.21789192
Observations 16

ANOVA
df SS MS F Significance F
Regression 1 1402004795 1402004795 2.290193853 0.15243804468
Residual 14 8570482847 612177346.2
Total 15 9972487642

Coefficients Standard Error t Stat P-value Lower 95% Upper 95%

Intercept 89067.88264739 20329.46496 4.38122119 0.000627084 45465.5168349 132670.248
Bank Prime Rate -5529.56512215 3653.884834 -1.513338645 0.152438045 -13366.3686729 2307.23843

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.634133176324
R Square 0.402124885315
Adjusted R Squar 0.35941951998
Standard Error 20636.82940923
Observations 16

ANOVA
df SS MS F Significance F
Regression 1 4010185450 4010185450 9.41626145 0.00833641911
Residual 14 5962302193 425878728.1
Total 15 9972487642

Coefficients Standard Error t Stat P-value Lower 95% Upper 95%

Intercept -52774.8596836 37034.62282 -1.4250141 0.176064352 -132206.225689 26656.5063
Housing Starts 256.7850477663 83.68169676 3.068592748 0.008336419 77.3056585412 436.264437

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.640851128259
R Square 0.41069016859
Adjusted R Squar 0.263362710738
Standard Error 22130.07947587
Observations 16
ANOVA
df SS MS F Significance F
Regression 3 4095602631 1365200877 2.787600998 0.08619240539
Residual 12 5876885011 489740417.6
Total 15 9972487642

Coefficients Standard Error t Stat P-value Lower 95% Upper 95%

Intercept 45387.61105322 252780.1891 0.179553672 0.860499168 -505373.107966 596148.33
Unemployment Ra -11010.7330217 30462.01584 -0.361457793 0.724041411 -77381.7639491 55360.2979
Bank Prime Rate -5217.57779439 12798.94656 -0.407656815 0.690704486 -33104.0867628 22668.9312
Housing Starts 231.9867867452 111.7907361 2.075187935 0.060133244 -11.5843032978 475.557877
 ABC_Total Unemployment Rate Bank Prime Rate Housing Starts
27512 3.90 9.50 357
45798 4.23 8.62 348
76968 4.40 7.34 461
43858 4.83 6.57 429
30580 5.53 5.16 366
53198 5.70 4.75 369
88704 5.83 4.75 475
51590 5.73 4.75 459
35372 5.87 4.45 403
57840 5.83 4.25 375
93388 6.13 4.24 490
58906 6.13 4.00 511
39382 5.87 4.00 472
75219 5.67 4.00 425
122868 5.57 4.00 540
54996 5.43 4.42 532
41803
74819
126100 140000
70742
120000
Triple exponential smoothing
100000
eping Units) for Product Family ABC 80000

s for Shower Faucets 60000

40000

20000

0
amily for the next four quarters. 0 2 4

ABC_Total= 1127.023+10824.76*Unemployment Rate

R Square= 0.0838

Lower 95.0% Upper 95.0%

-110835.80604044 113089.853548225
-9690.0160271067 31339.5534102842
ABC_Total=89067.88+(-5529.565*Bank_Prime_Rate)

R Square= 0.141

Lower 95.0% Upper 95.0%

45465.5168348815 132670.248459896
-13366.368672945 2307.23842864685

ABC_Total= -52774.85+256.78*Housing_Starts

R Square= 0.4021

Lower 95.0% Upper 95.0%

-132206.22568934 26656.5063222221
77.3056585411678 436.264436991331

ABC_Total= 45387.61+(-11010.733*Unemployment_Rate)+(-5217.577*Bank_Prime_Rate)+ 231.986*Housing_Starts

R Sqare= 0.410
 Lower 95.0% Upper 95.0%
-505373.10796569 596148.330072119
-77381.763949071 55360.2979057396
-33104.08676275 22668.9311739725
-11.584303297798 475.557876788128
 Unemployment Rate
140000

120000

100000

80000

60000

40000

20000

0
3.50 4.00 Sales
4.50 5.00 5.50 6.00 6.50

140000

120000

100000
140000
SUMMARY OUTPUT Unemployment Rate
80000 Sales
120000
60000
Regression Statistics
Multiple R 0.28951 100000
40000
R Square 0.083816
80000
Adjusted R 0.018374
20000
Standard E 25546.37 60000
0
Observatio
0 2 4 16 6 8 10 12 14 16 18 40000

ANOVA 20000
df SS MS F Significance F
Regression 1 8.36E+08 8.36E+08 1.280771 0.276769 0
300 35
Residual 14 9.14E+09 6.53E+08
Total 15 9.97E+09

Coefficients
Standard Error t Stat P-value Lower 95%Upper 95%
Lower 95.0%
Upper 95.0%
Intercept 1127.024 52202.31 0.02159 0.98308 -110836 113089.9 -110836 113089.9
Unemploym10824.77 9564.953 1.131712 0.276769 -9690.016 31339.55 -9690.016 31339.55

SUMMARY OUTPUT Bank Prime Rate

Regression Statistics
Multiple R 0.37495
R Square 0.140587
Adjusted R 0.079201
Standard E 24742.22
Observatio 16
 ANOVA
df SS MS F Significance F
Regression 1 1.4E+09 1.4E+09 2.290194 0.152438
Residual 14 8.57E+09 6.12E+08
Total 15 9.97E+09

Coefficients
Standard Error t Stat P-value Lower 95%Upper 95%
Lower 95.0%
Upper 95.0%
Intercept 89067.88 20329.46 4.381221 0.000627 45465.52 132670.2 45465.52 132670.2
Bank Prime-5529.565 3653.885 -1.513339 0.152438 -13366.37 2307.238 -13366.37 2307.238

SUMMARY OUTPUT Housing Starts

Regression Statistics
Multiple R 0.634133
R Square 0.402125
Adjusted R 0.35942
Standard E 20636.83
Observatio 16

ANOVA
df SS MS F Significance F
Regression 1 4.01E+09 4.01E+09 9.416261 0.008336
Residual 14 5.96E+09 4.26E+08
Total 15 9.97E+09

Coefficients
Standard Error t Stat P-value Lower 95%Upper 95%
Lower 95.0%
Upper 95.0%
Intercept -52774.86 37034.62 -1.425014 0.176064 -132206 26656.51 -132206 26656.51
Housing St 256.785 83.6817 3.068593 0.008336 77.30566 436.2644 77.30566 436.2644

+ 231.986*Housing_Starts
 Bank Prime Rate
140000

120000

100000

80000

60000

40000

20000

0
3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00

Housing Starts
140000

120000

100000

80000

60000

40000

20000

0
300 350 400 450 500 550 600
 2001 2002 2003 2004 Average SI
Jan_Mar 27512 30580 35372 39382 33212 55.57369
Apr-Jun 45798 53198 57840 75219 58014 97.07597
Jul-Sep 76968 88704 93388 122868 95482 159.7726
Oct-Dec 43858 51590 58906 54996 52338 87.57774
Total 194136 224072 245506 292465 59761 100
 Seasonality Removed(Unadjusted) Seasonality Removed Adjusted
2001 2002 2003 2004 2001 2002
Jan_Mar 49505.44 55026.03 63648.82 70864.46 Jan_Mar 49302.44 54981.62
Apr-Jun 47177.49 54800.38 59582.2 77484.68 Apr-Jun 46984.04 54756.16
Jul-Sep 48173.47 55518.91 58450.57 76901.8 Jul-Sep 47975.94 55474.1
Oct-Dec 50078.93 58907.66 67261.38 62796.78 Oct-Dec 49873.59 58860.12
Total 194935.3 224253 248943 288047.7 Total 194136 224072

Correction Factor Sales for Year/ Year Unadjusted Sales per year
CF 0.9959 0.999193 0.986194 1.015335
ty Removed Adjusted
2003 2004
62770.06 71951.19
58759.6 78672.93
57643.59 78081.11
66332.75 63759.78
245506 292465
 Trend
Deseasonalized Detrended Adjustme
Quarter Period Actual ABC Demand Period Forcast nt
Jan-Mar 2001 27512 49302 1 47442 1860.513
Apr-Jun 2001 45798 46984 2 43263 3721.026
Jul-Sep 2001 76968 47976 3 42394 5581.539
Oct-Dec 2001 43858 49874 4 42432 7442.052
Jan-Mar 2002 30580 54982 5 45679 9302.565
Apr-Jun 2002 53198 54756 6 43593 11163.08
Jul-Sep 2002 88704 55474 7 42451 13023.59
Oct-Dec 2002 51590 58860 8 43976 14884.1
Jan-Mar 2003 35372 62770 9 46025 16744.62
Apr-Jun 2003 57840 58760 10 40154 18605.13
Jul-Sep 2003 93388 57644 11 37178 20465.64
Oct-Dec 2003 58906 66333 12 44007 22326.15
Jan-Mar 2004 39382 71951 13 47765 24186.67
Apr-Jun 2004 75219 78673 14 52626 26047.18
Jul-Sep 2004 122868 78081 15 50173 27907.69
Oct-Dec 2004 54996 63760 16 33992 29768.21

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.88816251
R Square 0.78883264
Adjusted R Squa 0.77374926
Standard Error 4743.82964
Observations 16

ANOVA
df SS MS F Significance F
Regression 1 1176912820.51 1.18E+09 52.298125678 4.35E-06
Residual 14 315054875.7415 22503920
Total 15 1491967696.252

Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0%
Intercept 43947 2487.68525267 17.66575 5.742287E-11 38611.27 49282.381962 38611.27
Period 1860.51291 257.2702841476 7.231744 4.345142E-06 1308.723 2412.3027926 1308.723

Level 43946.8277
 140000

120000

100000

80000 Actual
Deseasonal
f(x) = 1860.51291197304 x + 43946.8277482291 Linear (Deseasona
60000 R² = 0.788832642601425
Detrend
Linear (Detrend)
40000 f(x) = 1.28399252015002E-13 x + 43946.8277482291
R² = 0

20000

0
0 2 4 6 8 10 12 14 16 18

Upper 95.0%
49282.38
2412.303
 Actual
Deseasonal
291 Linear (Deseasonal)
Detrend
Linear (Detrend)
7482291

18
Quarter Quarter no Level Trend Deseasonalized Forecast Unadjusted Seasonal Forecast
Jan-Mar 2005 17 43947 31629 75576 42000
Apr-Jun 2005 18 43947 33489 77436 75172
Jul-Sep 2005 19 43947 35350 79297 126694
Oct-Dec 2005 20 43947 37210 81157 71076
175787 137678 313465 314942

1860.512912 Correction Fcator

Demand Forecast
41803
74819
126100
70742
313465

0.9953121520242