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Advanced techniques can be used when there is trend or seasonality, or when other factors (such as price discounts) must be considered. What is Single Regression? EXAMPLE: 16 Months of Demand History EXAMPLE: Building a Regression Model to Handle Trend and Seasonality EXAMPLE: Causal Modeling
For time series models, x is the time period for which we are forecasting For causal models (described later), x is some other variable that can be used to predict demand: o Promotions Price changes Economic conditions Etc. Software packages like Excel can quickly and easily estimate the a and b values required for the single regression model
Notice how well the regression line fits the historical data, BUT we arent interested in forecasting the past
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Two possible x variables: Month or Price Which would be a better predictor of demand?
Demand seems to be trending down over time, but the relationship is weak. There may be a better model ...
Demand shows a strong negative relationship to price. Using Excel to develop a regression model results in the following: Demand = 9328 1481 * (Price) Interpretation: For every dollar the price increases, we would expect demand to fall 1481 units.