Analysis of Forecasting Sales By Using Quantitative And Qualitative Methods

*B. Rama Sanjeeva Sresta. Int. Journal of Engineering Research and Application www.ijera.com
ISSN : 2248-9622, Vol. 6, Issue 9, ( Part -2) September 2016, pp.83-86
www.ijera.com 83|P a g e
Analysis of Forecasting Sales By Using Quantitative And
Qualitative Methods
*
B. Rama Sanjeeva Sresta, **
V. Arundhati
*
(Department of Mechanical Engineering, Srinivasa Ramanujan Institute of Technology, Ananthapur, A.P.,
India,)
**
(Department of Mechanical Engineering, Srinivasa Ramanujan Institute Of Technology, Ananthapur , A.P.,
India,)
ABSTRACT
This paper focuses on analysis of forecasting sales using quantitative and qualitative methods. This forecast
should be able to help create a model for measuring a successes and setting goals from financial and operational
view points. The resulting model should tell if we have met our goals with respect to measures, targets,
initiatives.
Keywords: Goals, Qualitative, Quantitative, Success.
I. INTRODUCTION
A Forecast is an estimate of an event
which will happen in feature. The event may be
demand of a product, rainfall at a particular place,
population of country or growth of a technology. In
business, forecast may be classified into technology
forecast, economic forecast and demand forecast.
Combination of hardware and software is called as
“Technology forecast”. Its deals with certain
characteristics such as level of technological
performance, rate of technological advances.
Government agencies and other organizations
involve in collecting data and prediction of
estimate on the general business environment is
“Economic forecast”. Expected level of demand for
goods or services is given by “Demand forecast”.
Two general approaches of forecasting are
Quantitative and Qualitative. Quantitative involves
either projections of historical data or development
of association models which attempt to use casual
variables to arrive at the forecasts. Qualitative
consists mainly of subjective inputs, often of non-
numerical description. Overviews of both methods
are moving average, weighted moving average
method, exponential smoothing method, trend
projection, linear regression analysis.
II. MOVING AVERAGE AND
WEIGHTED MOVING AVERAGE:
In moving average method the raw data is
converted into a moving average that reflects the
trend in change of demand. The moving average is
an arithmetic average of data over a period of time.
𝐹𝑡+1 = (𝐴1 + 𝐴𝑡−1 + 𝐴𝑡−2 + 𝐴𝑡−3 + − − − − − −
−𝐴(𝑡−𝑛+1))/𝑛 --------------------- 1
In waited moving average
𝐹𝑡+1 = ( 𝑊𝑡 𝐴𝑡 + 𝑊𝑡−1 𝐴𝑡−1 + 𝑊𝑡−2 𝐴𝑡−2
+𝑊𝑡−3 𝐴𝑡−3 + − − − − − − − −
−𝑊𝑡−𝑛+1 𝐴𝑡−𝑛+1)/n ------------------2
Where
𝐹𝑡+1 𝑤𝑒𝑖𝑔𝑕𝑡𝑒𝑑 𝑚𝑜𝑣𝑖𝑛𝑔 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑓𝑜𝑟 𝑡𝑕𝑒 𝑝𝑒𝑟𝑖𝑜𝑑 𝑜𝑓 𝑡 +
1, 𝑊𝑡 = 𝑤𝑒𝑖𝑔𝑕𝑡𝑒𝑑 𝑓𝑎𝑐𝑡𝑜𝑟 𝑊𝑡 = 1𝑛
𝑡=1
III. LINEAR REGRESSION ANALYSIS
Regression analysis is a method of
predicting the value of one variable based on the
value of other variables used to forecast both time
series and cross sectional data. Two types of
Regression analyses are simple regression and
multiple regressions where there are two or more
predictors, multiple regression analysis is
employed. These models are based on functional
relationships between variables that define the
environment. The value of one variable is based on
the value of other variable to make estimates, must
identify the effective predictors of the variable of
interest. Need to identify variables that are
important indicators and can be measured at the
least cost to use for the forecast. Simple
forecasting model, reflecting an independent and
dependent variable having a relationship
Y=f(X) ------------------------------3
The two types of variables are dependent variable
and independent variable. The functional
relationship between the two can be system of
coordinates where the dependent variable is shown
on the Y and independent variable on X-axis.
Y=f(X) or Y= a + bX.
Where Y=dependent variable, „a‟ is Y intercept, „b‟
is slope of the line, X the time period. Multiple
regression is always better to use as few variables
as predictors as necessary to get a reasonably
RESEARCH ARTICLE OPEN ACCESS

accurate forecast, in many cases this may not give
accurate results.
The forecast takes the form:
Y=𝑏0 + 𝑏1 𝑋1 + 𝑏2 𝑋2 + − − − − − + 𝑏 𝑛 𝑋 𝑛
--------------------- 4
Where 𝑏0 is intercept and 𝑏1, 𝑏2 − − − − − 𝑏 𝑛 are
coefficiants representing the contribution of the
independent variables 𝑋1, 𝑋2 − − − − − − − −𝑋 𝑛
Multiple regressions are used when two
are more independent factors are involved, and it is
widely used short to intermediate term forecast.
They are used to assess the factors which have to
be included (or) excluded. They can be used to
develop alternate models with different factors.
Developing a model with environmental forces that
are important to one organization may not be
important for another. A small scale or medium
scale manufacturer may be interested in demand in
the local market, government plans in infrastructure
development, cost and availability of power etc.
Three goals of analysis of the environmental forces
are forecasting, modeling, characterization.
Fig1: forecasting and decision-making
IV. NUMERICAL EXAMPLES
4.1 Case study 1
Company ABC wants to forecast the sale
for the next 12 months based upon a simple moving
average and weighted moving average, using 5
previous periods as the data base, will prove
accurate forecast method. To found out which
method will provide it with mare accurate
forecasts. Where the different periods of time in the
past for instant.
Time in past weight age
5 years ago 0.01
4 years ago 0.05
3years ago 0.25
2 years ago 0.3
Last year 0.4
Table 1: Best Accurate Forecast Analysis
Month Sales Total Off 5 Periods Moving
Average(MA)
Weighted Moving
Average(WMA)
1 1104.0
2 1500.0
3 1460.0
4 1880.0
5 1724.0 7668 1533.6 1687.76
6 2034.0 8598 1719.6 1870.09
7 2404.0 9502 1900.4 2090.49
8 2698.0 10740 2148 2390.33
9 2972.0 11832 2366.4 2102.12
10 2852.0 12960 2592 2819.24
11 3248.0 14174 2834.8 3026.47
12 3172.0 14942 2988.4 3100.77

1. Flowchart for Forecast Analysis
Fig1: Flow Chart for Accurate Forecast Analysis
4.2 Case study2
Company of sales in millions of dollars using the principal of least squares fit a straight line trend
equation form the data also determining the sum of squares of deviation forecast the sales for the month of 13 &
14
Table2: Analysis of Linear Regression
For 13𝑡𝑕
month forecast=4507.9985
For 14𝑡𝑕
month forecast is= 4854.7675
V. CONCLUSION
Forecast has a high level of accuracy. These are
simple, commonsense rules made up and then
tested to see whether they should be kept. Example
of simple forecasting rules could include
exponential smoothing, moving averages,
predictive theories, subjective information
etc…The data collected for making forecasts can
also be used to measure performance
characteristics. At the end of the day, it is not the
sophistication of the forecasting technique but the
ability to recognize the pattern of data accurately
and to put it to use effectively. This determines the
best forecasting method.
The best method is weighted moving average
method.
Month(X) Sales(Y) XY 𝑋2
𝑌2
𝑌′ Deviation (Y-𝑌′
)
1 1104.0 1104 1 1218816 346.770 757.23
2 1500.0 3000 4 2250000 693.539 806.461
3 1460.0 4380 9 2131600 1040.308 419.692
4 1880.0 7520 16 3534400 1387.077 492.923
5 1724.0 8620 25 2972176 1733.846 -9.846
6 2034.0 12204 36 4137156 2080.615 -46.615
7 2404.0 16828 49 5779216 2427.382 -23.382
8 2698.0 21584 64 7279204 2774.153 -76.153
9 2972.0 26748 81 8832784 3120.922 -148.922
10 2852.0 28520 100 8133904 3467.691 -615.691
11 3248.0 35728 121 10549504 3814.460 -566.46
12 3172.0 38064 144 10061584 4161.229 -989.229
78 27048
𝑋=78/12=6.5
𝑌= 27048/12=2254
a= 2254-346.769(6.5)=0.0015 ,
b=346.769
b= ( 𝑋𝑌-n𝑋 𝑌)/( 2𝑋 -n𝑋2
)
Therefore Y=0.0015+346.769(X)

The results obtained from average methods are
month Moving average Weighted moving average
11 2834.8 3026.47
12 2988.4 3100.77
Results of sales by using linear regression method are
Month Sales
13 4507.9985
14 4854.7675
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