De La Salle University - Manila

Term 3, A.Y. 2020-2021

DSIOPMA Final Paper Part 1 & 2

TEAM GANTT

DEE, Kathryn Gail C. (11908645)

ELLESCAS, Jose Emmanuel C. (11929464)

GO, Luigi Joaquin C. ( 11832762)

LEE, Michael Angelo D. (11922699)

LEONIO, Carissa Beatrice A. (11819413)

REYES, Angelika Mae P. (11900261)

Submitted to:

Mr. Melvin Moraga

Submitted on:

August 11, 2021

1
 Table of Contents

I. Introduction and Background of the Company ------------------------------------------------- 4

II. Statement of the Problem -------------------------------------------------------------------------- 6

III. Mathematical Application ------------------------------------------------------------------------- 7

A. Forecasting ---------------------------------------------------------------------------------- 7

1. Forecasting based on the sales data of 2021 ---------------------------------- 8

2. Forecasting sales for HBW 9801 black for 2021 ----------------------------- 8

3. Forecasting sales for Paper Fox White Envelope - Short ------------------- 9

4. Forecasting sales for HBW White Board Marker - Black ----------------- 10

B. Labor Productivity of Workers in the Repacking Department --------------------- 10

IV. References ------------------------------------------------------------------------------------------ 12

2
 List of Tables

Table 1: Monthly Sales for the year 2021 ---------------------------------------------------------------- 8

Table 2: Monthly Sales for HBW 9801 Black for the year 2021 -------------------------------------- 9

Table 3: Monthly Sales for Paper Fox White Envelope-Short for the year 2021 ------------------- 9

Table 4: Monthly Sales for HBW White Board Marker-Black -------------------------------------- 10

Table 5: Outputs per day of worker with computer systems ----------------------------------------- 11

Table 6: Outputs per day of workers without computer systems ------------------------------------ 11

3
 I. Introduction & Background of the company

As the entire country has undergone several quarantines and maintains restrictions, it is

without a doubt that businesses have been immensely affected. Although some have resorted to

operating their businesses online, there are those who simply cannot due to the physical aspects

that the business must maintain. According to Vader (2021), retailing sectors have experienced a

fluctuation in demand as consumers shift buying channels. With this, it is crucial for a business

or company to be able to predict and manage demand. Some countries have started to gradually

lift restriction measures on businesses which are essential for survival; however, this does not

save the retail industry from still having a drop on their sales (Statistica Research Department,

2021).

Last 2018 an article by Prado (2018) listed several popular office & school supplies

stores in the Philippines. Among these stores were Baclaran, a place in Paranaque known for its

various boutiques which sell school supplies at a cheaper price. Divisoria in Tondo, Manila was

also listed as an alternative to where you can purchase different school supplies at a cheaper rate

when compared to the mall stores. Speaking of such mall exclusive or more popular stores, we

have Office Warehouse, the store that started out as early as 1997 is still going strong today, with

the different branches they have across the country and the different perks & promotions they

4
offer to their customers. Next on the list would be the more premium office/school supply store,

Fully Booked, though Fully Booked is on the expensive side, what they offer is of premium

quality and they also offer various resource materials ranging from educational, business,

entertainment etc.. Fully Booked also offers and includes international bestsellers in their

catalogue as a way to have more variety for the said company. Lastly the number one shopping

place for school & office supplies is National Bookstore, from the name itself it became the most

popular as early as 1930’s they have started selling books and have evolved to selling different

varieties of school supplies, reference materials, etc.. National Bookstore also owns different

stores under their belt, These stores are known as Powerbooks, Art bar, Noteworthy & Work

station. Today they have 200 branches across the nation, cementing their business as one of the

leading office/school supply stores.

Paper and More Inc. is a retailer and wholesaler of school and office supplies located in

Manila East Road, Taytay Rizal. The company was established in the year 2009 and has been

delivering its various merchandise to schools and offices in Rizal. It is a sole proprietorship that

is currently owned by CEO Nelson Go and aims to provide school supplies to schools and offices

even outside of Rizal.

The top-selling wholesale school and office supplies products of the company are HBW

9801 black ballpen, Paper Fox short white envelope, HBW black whiteboard marker as of the

current year 2021. While these products are purchased the most, the company also sells a variety

of different school and office supplies and is one of the main suppliers for public schools and

offices in Rizal and even selected Kumon branches. Aside from a variety of different products,

5
Paper and More has the competitive advantage of price point as compared to other school

supplies business because the company buys its supplies directly from different manufacturers

thus the company can afford to lower the price of the majority of its products, making Paper and

More a well-known business in Rizal due to its affordable pricing.

In terms of the workflow, the company buys school and office supplies from either

manufacturers or other suppliers and then divides the total orders into products to be sold for

wholesale and retail depending on the product itself. If a product’s demand for wholesale is

higher than retail, then a bigger portion of stocks ordered will be placed in wholesale, and the

same for retail. In regards to the organizational structure, the CEO oversees operations in the

store while 2 secretaries will assist him so as to lighten the workload. The store itself has 3

cashier counters but the number of counters open in a day will vary depending on the number of

customers, the company also has a repacking department wherein all the newly bought

merchandise is sorted out and packaged for either wholesale or retail. Lastly, there will always be

salesmen or saleswomen in the store at all times in order to assist the customers in finding the

merchandise that they are looking for, the number also varying upon the number of customers.

II. Statement of the Problem

In light of the emergence of the COVID-19 pandemic, the school supplies industry has

been affected severely. Face-to-face classes are canceled and some students are opting to get an

iPad to replace notebooks and pens. Some employees who have a work-from-home setup also

opted to use online sharing platforms to collaborate and avoid contamination from papers.

6
Unfortunately, this decline in the purchase of school and office supplies has also affected Paper

and More Inc. According to Schmidt (2020), there has been a steady decline in the usage of

office supplies in the past 10 to 12 years. Amid the COVID-19, people have been switching from

manual to technologies to (1) avoid extra costs of supplies, (2) help the environment, and (3)

communicate and transfer files faster. Moreover, the halt of face to face office work and school

operations has severely affected this kind of industry. Physical contact has been avoided,

therefore using technology as a way to combat contamination. Thus, the demand for office and

school supplies have declined. Despite that, there are office and school supplies that are still

being used by the majority like pens or any writing instruments.

One of the problems of the company was concerning the inventory stock of Paper and

More Inc has been piling up since the company orders its supplies monthly and COVID has

affected the purchasing powers of the consumers. Several inventories are still stuck and the

company will only incur a further loss if they continue to purchase supplies in the following

month without optimizing resources to maximize their profit. If Paper and More Inc. tries to

lessen their purchase of inventory, it will affect their profit. In line with this, the group has

decided to make use and incorporate the forecasting methods for the company to analyze if the

current sales of the company has a recurring trend or whether the current sales data would be

enough for the company moving forward for the upcoming months or they should cut different

expenses that would hurt them in the upcoming months up until the end of the year. The group

would also utilize the said forecasting methods to predict the top 3 best selling products of the

company to determine whether they would still fare well for the upcoming months, this is for the

7
company to analyze whether they should continue to invest in purchasing the said products or

invest in other products that would benefit them for the upcoming months.

Another problem faced by Paper and More Inc. is a lower productivity rate due to lack of

computer systems. Even before the pandemic hit, the retail company only made use of 2 to 3

computer systems for counting and arranging their inventory which is not proportional to the

number of workers they have assigned. On a daily basis, there are 6 workers assigned to count,

arrange and sort the inventory in the repacking department, and only 3 workers are able to use a

computer system to assist them. Because of this, the productivity rate of the workers without a

computer system to use are lower than those who are given access to the system. The data

provided showed that the productivity rate of workers with computers individually is 31.57%

higher than those who work individually without a computer system. This can have an overall

effect on the growth of sales of Paper and More Inc. because of possible delays in delivery. The

group will be computing the productivity of the workers using the given data from the company.

In regards to how the data was collected, one of the group’s members was given access to

the company’s database in order to collect data on which were the top 3 products in terms of

quantity sold, the total sales for each month in 2021 from January to July. The database also

provided the quantity wherein each of the top 3 products were sold for each month for the year

2021. For the data used in forecasting the monthly sales, the company’s past financial statements

were compiled and used. Data regarding the company’s top 3 products was collected with the

company’s inventory database which provided the price of each product, the current inventory

and the quantity sold per month.

8
III. Mathematical Application and Methods to be Used

To address the problems of Paper & More Inc. with their inventories and profit, the group

will be studying different methods which are appropriate to the concern of the business. The

group made sure that the methods to be used are accurate and easy to understand so that the

business owners can smoothly grasp the information that will be garnered from the study.

For the methods to be used, the group will incorporate past lessons discussed in

DSIOPMA class in order to find optimal solutions to the company’s existing problems. All

methods will be studied and analyzed carefully to ensure that the results will be accurate.

A. Forecasting

The group will use the different kinds forecasting method to predict future sales of the

company’s best selling products, in order to avoid further losses & expenses. These include the

Naive Method, four-month moving average method and weighted average method. The

naive method will also be used to compare the forecasted data on the more

sophisticated/complicated techniques such as the four-month moving average and the weighted

average. The four-month moving average method will be based from the months of April to July

to determine the company's asset price's future direction. Lastly, the group will make use of the

weighted average method to assign these weights (0.20, 0.30, 0.50) to the last three months or

recent data.

A.1. Forecasting based on the sales data of 2020

a. Estimate the orders for the following months (August-December) using the naive

method.

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 b. Estimate the orders for the following months (August-December) using the

four-month moving average method.

c. Estimate the orders for the following months (August-December) using the

weighted average method with weights of (0.20, 0.30, 0.50) for the last three

months.

Monthly sales for the year 2020 Sales

January P 196,930.20

February P 172, 578.25

March P 174,713.35

April P 150,951.90

May P 158,877.15

June P 204,641.80

July P 172,649.70

August P 176,953.80

September P 137,927.25

October P 194,812.60

November P 177,645.20

10
 December P 158,942.45

Table 1: Monthly Sales for the year 2020

A.2. Forecasting Sales for HBW 9801 black

a. Estimate the orders of HBW 9801 Black ballpen for the following months

(August-December) using the naive method.

b. Estimate the orders of HBW 9801 Black ballpen for the following months

(August-December) using the four-month moving average method.

c. Estimate the orders of HBW 9801 Black ballpen for the following months

(August-December) using the weighted average method with weights of (0.20,

0.30, 0.50) for the last three months.

Sales for HBW 9801 Black 2020 Sales (in unit)

January 800

February 650

March 764

April 842

May 657

June 746

July 452

11
 August 650

September 720

October 234

November 492

December 963

Table 2: Monthly Sales for HBW 9801 Black for the year 2020

A.3. Forecasting sales for Paper Fox White Envelope - Short

a. Estimate the number of orders of Paper Fox White Envelope - Short for the

following months (August-December) using the naive method.

b. Estimate the number of orders of Paper Fox White Envelope - Short for the

following months (August-December) using the four-month moving average

method.

c. Estimate the number of orders of Paper Fox White Envelope - Short for the

following months (August-December) using the weighted average method with

weights of (0.20, 0.30, 0.50) for the last three months.

Sales for Paper Fox White Envelope-Short Sales (in units)

January 530

February 642

12
 March 226

April 127

May 463

June 961

July 81

August 63

September 61

October 94

November 867

December 500

Table 3: Monthly Sales for Paper Fox White Envelope-Short for the year 2020

A.4. Forecasting sales for HBW White Board marker - Black

d. Estimate the number of orders of HBW White Board marker - Black for the

following months (August-December) using the naive method.

e. Estimate the number of orders of HBW White Board marker - Black for the

following months (August-December) using the four-month moving average

method.

13
 f. Estimate the number of orders of HBW White Board marker - Black for the

following months (August-December) using the weighted average method with

weights of (0.20, 0.30, 0.50) for the last three months.

Sales for HBW White Board marker-Black Sales (in units)

January 450

February 534

March 186

April 109

May 52

June 1350

July 272

August 150

September 167

October 453

November 584

December 350

Table 4: Monthly Sales for HBW White Board Marker-Black

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 After the computation of each table using the various forecasting methods, the group

wants to find out which of the several forecasting methods is the best forecasting method for the

company to achieve the desired result. Hence, Paper & More Inc. would be able to forecast the

future sales of the company’s best selling products, preventing them from further losses &

expenses.

B. Labor Productivity of Workers in the Repacking Department

Additionally, the group will use labour productivity to measure the productivity of the

workers in the repacking department. With this, the group can determine whether it will be

beneficial for the company to acquire more computer systems for operational purposes. The

outputs of the workers assisted with computer systems will be compared to the number of

outputs of those who are doing the work manually. The basis of the outputs will be one of the

top-selling products of Paper and More Inc. which is the HBW 9801 black ballpen. Each pen

costs Php. 2.50. Provided below are the corresponding data to be used in the computation.

No. of workers with computer systems No. of outputs per day (in units)

3 450

Table 5: Outputs per day of worker with computer systems

The table above shows that each worker with a computer system can finish 150 outputs in a day.

No. of workers without computer systems No. of outputs per day (in units)

7 800

15
 Table 6: Outputs per day of workers without computer systems

The table above shows that each worker without a computer system can only finish 114 outputs

per day.

Through this method, the group can also determine the percent increase in the

productivity of the workers if the company plans to invest in computer systems.

IV. Presentation of Solutions

In this section of the paper, the group will provide solutions and computations for each

problem that needs to be addressed for Paper & More, Inc. using different forecasting and labor

productivity methods. This will help the group in analyzing the results of each problem and

formulating recommendations and suggestions for the improvement of the case.

A.1. Forecasting Sales based on data from 2020

In order to forecast sales of Paper & More, Inc., for 2021 based on data from 2020, the

group will use three forecasting methods such as naive method, four-month moving average

method and weighted average method. This will be used to compare sales of 2020 to sales of

2021 to see if they are enough for the company to move forward in the following months

(August-December) or if they need to cut certain expenses that will affect the company in the

following months (August-December). The solution for each problem will be provide below:

a.) Forecasting Using Naive Method

The naive method used the previous sales of 2020 to determine the Paper & More.

Inc.'s forecasted sales for 2021.

16
 Forecasted Sales (

Monthly Sales for 2020 Sales (in unit) Naive Method) Error |Error| Error²

January 196,930.20

February 172,578.25 196,930.20 -24,351.95 24,351.95 593,017,468.8

March 174,713.35 172,578.25 2135.10 2,135.10 4,558,652.01

April 150,951.90 174,713.35 -23,761.45 23,761.45 564,606,506.10

May 158,877.15 150,951.90 7925.25 7,925.25 62,809,587.56

June 204,641.80 158,877.15 45764.65 45,764.645 2,094,402,732

July 172,649.70 204,641.80 -31.992.1 31,992.10 1,023,494,462

August 176,953.80 172,649.70 4,304.10 4,304.10 18,525,276.81

September 137,927.25 176,953.80 -39,026.55 39,026.55 1,523,071,605

October 194,812.60 137,927.25 56,885.35 56,885.35 3,235,943,045

November 177,645.20 194,812.60 -17,167.4 17,167.4 294,719,622.80

December 158,942.45 177,645.20 -18,702.75 18,702.75 349,792,857.60

January 158,942.45

MAD 14480.854166667

MSE 887,722,024.8334

17
 09

Table #1: Forecasted Sales using Naive Method

Figure #1: Graph of Forecasted Sales using Naive Method

b.) Forecasting 4 month Moving Average

The 4 month moving average method is used to help see trends or direction from

previous sales of 2020 to forecasted sales of 2021.

18
 Forecasted Sales

Monthly Sales for 2020 Sales (in unit) (4MA ) Error |Error| Error²

January 196,930.20

February 172,578.25

March 174,713.35

April 150,951.90

May 158,877.15 173,793.43 -14 916.29 14 916.29 222 495 259.875626

June 204,641.80 164,280.16 40 361.64 40 361.64 1 629 061 781.681400

July 172,649.70 172,296.05 353.65 353.65 125 068.322500

August 176,953.80 171,780.14 5 173.66 5 173.66 26 766 783.663906

September 137,927.25 178,280.61 -40 353.36 40 353.36 1 628 393 865.056410

October 194,812.60 173,043.14 21 769.46 21 769.46 473 909 497.539906

November 177,645.20 170,585.84 7059.36 7 059.36 49 834 598.906407

December 158,942.45 171,834.71 12 895.26 12 895.26 166 210 432.368907

January 167,331.88

MAD 17 859.96

MSE 524 599 660.926758

19
 Table #2: Forecasted Sales using 4 Month Averaging Method

Figure #2: Graph of Forecasted Sales using 4 Month Averaging Method

c.) Forecasting using Weighted Average (0.20, 0.30, 0.50)

The weighted average method is used to see the average cost with different

weights (0.20, 0.30, 0.50) from previous sales of 2020 to forecasted sales of 2021.

20
 Forecasted

Sales (

Monthly Sales for Weighted

2020 Sales (in unit) Average) Error |Error| Error²

January 196,930.20

February 172,578.25

March 174,713.35

April 150,951.90 178 516.19 -27 564.29 27 564.29 759 790 083.204100

May 158,877.15 162 405.61 -3 528.45 3 528.45 12 449 994.687025

June 204,641.80 159 66682 44 974.99 44 974.99 2 022 749 275.750220

July 172,649.70 180 174.43 -7 524.72 7 524.72 56 621 486.325625

August 176,953.80 179 492.82 -2 539.02 2 539.02 6 446 622.560400

September 137,927.25 181 200.17 -43 272.92 43 272.92 1 872 545 605.326400

October 194,812.60 156 579.71 38 232.90 38 232.90 1 461 754 260.081030

November 177,645.20 174 175.24 3 469.97 3 469.97 12 040 657.101225

December 158,942.45 174 851.83 -15 909.38 15 909.38 253 108 371.984400

January 171 727.31

21
 MAD 20 779.63

MSE 717 500 706.335603

Table #3:Forecasted Sales using Weighted Average Method

Figure #3: Graph of Forecasted Sales using Weighted Average Method

A.2. Forecasting Sales for HBW 9801 Black

In order to forecast sales for HBW 9801 Black for 2021 based on data from 2020, the

group will use three forecasting methods such as naive method, four-month moving average

method and weighted average method. This will be used to compare sales of 2020 to sales of

22
2021 for HBW 9801 Black to see if they are enough for the company to move forward in the

following months (August-December) or if they need to cut certain expenses that will affect the

company in the following months (August-December). The solution for each problem will be

provide below:

a.) Forecasting Using Naive Method

The naive method used the previous sales of 2020 to determine the forecasted

sales of 2021 for HBW 9801 Black.

Sales for HBW Forecasted Sales ( Naive

9801 Black 2021 Sales (in unit) Method) Error |Error| Error²

January 800

February 650 800 -150 150 22500

March 764 650 114 114 12996

April 842 764 78 78 6084

May 657 842 -185 185 34225

June 746 657 89 89 7921

July 452 746 -294 294 86436

August 650 452 198 198 39204

September 720 650 70 70 4900

October 234 720 -486 486 236196

23
November 492 234 258 258 66564

December 963 492 471 471 221841

January 963

MAD 217.5454545

MSE 67169.72727

Table #4: Forecasted Sales for HBW 9801 Black using Naive Method

Figure #4: Graph of Forecasted Sales for HBW 9801 Black using Naive Method

24
 b.) Forecasting using 4 month Moving Average

The 4 month moving average method is used to help see trends or direction from

previous sales of 2020 to forecasted sales of 2021 for HBW 9801 Black.

Sales for HBW Forecasted Sales (

9801 Black 2021 Sales (in unit) 4MA) Error |Error| Error²

January 800

February 650

March 764

April 842

May 657 764 -107 107 11449

June 746 728.25 17.75 17.75 315.0625

July 452 752.25 -300.25 300.25 90150.0625

August 650 674.25 -24.25 24.25 588.0625

September 720 626.25 93.75 93.75 8789.0625

October 234 642 -408 408 166464

November 492 514 -22 22 484

December 963 524 439 439 192721

January 602.25

25
 MAD 176.5

MSE 58870.03125

Table #5: Forecasted Sales for HBW 9801 Black using 4 Month Average Method

Figure #5: Graph for Forecasted Sales for HBW 9801 Black

using 4 Month Average Method

c.) Forecasting using Weighted Average (0.20, 0.30, 0.50)

The weighted average method is used to see the average cost with different

weights (0.20, 0.30, 0.50) from previous sales of 2020 to forecasted sales of 2021for

HBW 9801 Black.

Sales for HBW

9801 Black 2021 Sales (in unit) Forecasted Sales (WA) Error |Error| Error²

26
 January 800

February 650

March 764

April 842 1377.2 -535.2 535.2 286439.04

May 657 1300.4 -643.4 643.4 413963.56

June 746 1345.3 -599.3 599.3 359160.49

July 452 1412.3 -960.3 960.3 922176.09

August 650 1107 -457 457 208849

September 720 1206.8 -486.8 486.8 236974.24

October 234 1007.2 -773.2 773.2 597838.24

November 492 983.2 -491.2 491.2 241277.44

December 963 1036.4 -73.4 73.4 5387.56

January 863.3 -863.3 863.3 745286.89

MAD 588.31

MSE 401735.255

Table #6: Forecasted Sales for HBW 9801 Black using Weighted Average Method

27
 Figure #6: Graph of Forecasted Sales for HBW 9801 Black

using Weighted Average Method

A.3. Forecasting Sales for Paper Fox White Envelope- Short

In order to forecast sales for Paper Fox White Envelope - Short for 2021 based on data

from 2020, the group will use three forecasting methods such as naive method, four-month

moving average method and weighted average method. This will be used to compare sales of

2020 to sales of 2021 for Paper Fox White Envelope - Short to see if they are enough for the

company to move forward in the following months (August-December) or if they need to cut

certain expenses that will affect the company in the following months (August-December). The

solution for each problem will be provide below:

a.) Forecasting using Naive Method

The naive method used the previous sales of 2020 to determine the forecasted

sales of 2021 for Paper Fox White Envelope - Short

28
 Sales for Paper

Fox White Forecasted Sales ( Naive

Envelope- Short Sales (in unit) Method) Error |Error| Error²

January 530

February 642 530 112 112 12544

March 226 642 -416 416 173056

April 127 226 -99 99 9801

May 463 127 336 336 112896

June 961 463 498 498 248004

July 81 961 -880 880 774400

August 63 81 -18 18 324

September 61 63 -2 2 4

October 94 61 33 33 1089

November 867 94 773 773 597529

December 500 867 -367 367 134689

January 500 -500 500 250000

MAD 336.1666667

29
MSE 192861.3333

Table #7: Forecasted Sales for Paper Fox White Envelope - Short

using Naive Method

Figure #7: Graph of Forecasted Sales for Paper Fox White Envelope - Short

using Naive Method

b.) Forecasting Using 4 month Moving Average

The 4 month moving average method is used to help see trends or direction from

previous sales of 2020 to forecasted sales of 2021 for Paper Fox White Envelope - Short.

Sales for Paper

Fox White

Envelope- Sales (in unit) Forecasted Sales (4MA) Error |Error| Error²

30
 Short

January 530

February 642

March 226

April 127

May 463 381.25 81.75 81.75 6683.0625

June 961 364.5 596.5 596.5 355812.25

131950.562

July 81 444.25 -363.25 363.25 5

August 63 408 -345 345 119025

September 61 392 -331 331 109561

October 94 291.5 -197.5 197.5 39006.25

627660.062

November 867 74.75 792.25 792.25 5

December 500 271.25 228.75 228.75 52326.5625

January 380.5

MAD 367

31
MSE 180253.0938

Table #8: Forecasted Sales for Paper Fox White Envelope - Short

using 4 Month Average Method

Figure #8: Graph of Forecasted Sales for Paper Fox White Envelope - Short

using 4 Month Average Method

c.) Forecasting using Weighted Average (0.20, 0.30, 0.50)

The weighted average method is used to see the average cost with different

weights (0.20, 0.30, 0.50) from previous sales of 2020 to forecasted sales of 2021for

Paper Fox White Envelope - Short.

32
Sales for Paper

Fox White

Envelope-

Short Sales (in unit) Forecasted Sales (WA) Error |Error| Error²

January 530

February 642

March 226

April 127 411.6 -284.6 284.6 80997.16

May 463 259.7 203.3 203.3 41330.89

June 961 314.8 646.2 646.2 417574.44

July 81 644.8 -563.8 563.8 317870.44

August 63 421.4 -358.4 358.4 128450.56

September 61 248 -187 187 34969

October 94 65.6 28.4 28.4 806.56

November 867 77.9 789.1 789.1 622678.81

December 500 473.9 26.1 26.1 681.21

January 528.9

33
MAD 342.9888889

MSE 182817.6744

Table #9: Forecasted Sales for Paper Fox White Envelope - Short

using Weighted Average Method

Figure #9: Graph of Forecasted Sales for Paper Fox White Envelope - Short

using Weighted Average Method

A.4. Forecasting Sales for HBW White Board Marker - Black

In order to forecast sales for HBW White Board Marker - Black for 2021 based

on data from 2020, the group will use three forecasting methods such as naive method,

four-month moving average method and weighted average method. This will be used to

compare sales of 2020 to sales of 2021 for HBW White Board Marker - Black to see if

they are enough for the company to move forward in the following months

34
 (August-December) or if they need to cut certain expenses that will affect the company in

the following months (August-December). The solution for each problem will be provide

below:

a.) Forecasting using Naive Method

The naive method used the previous sales of 2020 to determine the forecasted

sales of 2021 for HBW White Board Marker - Black.

Sales for HBW

9801 Black 2021 Sales (in unit) Forecasted Sales (NM) Error |Error| Error²

January 450

February 534 450 84 84 7 056

March 186 534 -348 348 121 104

April 109 186 -77 77 5 929

May 52 109 -57 57 3 249

June 1350 52 1 298 1 298 1 684 804

July 272 1350 -1 078 1 078 1 162 084

August 150 272 -122 122 14 884

September 167 150 17 17 289

October 453 167 286 286 81 796

November 584 453 131 131 17 151

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 December 350 584 -234 234 54 756

January 350

MAD 339.27

MSE 286 646.55

Table #10: Forecasted Sales for HBW White Board Marker - Black

using Naive Method

Figure #10: Graph of Forecasted Sales for HBW White Board Marker - Black

using Naive Method

36
 b.) Forecasting Using 4 month Moving Average

The 4 month moving average method is used to help see trends or direction from

previous sales of 2020 to forecasted sales of 2021 for HBW White Board Marker - Black.

Forecasted

Sales for HBW Sales

9801 Black 2021 Sales (in unit) (4MA) Error |Error| Error²

January 450

February 534

March 186

April 109

May 52 319.75 -267.75 267.75 71 690.062500

June 1350 220.25 1 129.75 1 129.75 1 276 335.062500

July 272 424.25 -152.25 152.25 23 180.062500

August 150 445.75 -295.75 295.75 87 468.062500

September 167 456.00 -289.00 289.00 83 521.00

October 453 484.75 -31.75 31.75 1 008.062500

November 584 260.50 323.50 323.50 104 652.250000

December 350 338.50 11.50 11.50 132.250000

January 388.50

37
MAD 312.66

MSE 205 998.351563

Table #11: Forecasted Sales for HBW White Board Marker - Black

using 4 Month Average Method

Figure #11: Graph of Forecasted Sales for HBW White Board Marker - Black

using 4 Month Average Method

38
 c.) Forecasting using Weighted Average (0.20, 0.30, 0.50)

The weighted average method is used to see the average cost with different

weights (0.20, 0.30, 0.50) from previous sales of 2020 to forecasted sales of 2021 for

HBW White Board Marker - Black.

Sales for HBW Forecasted

9801 Black 2021 Sales (in unit) Sales (WA) Error |Error| Error²

January 450

February 534

March 186

April 109 343.20 -234.20 234.20 54 849.640000

May 52 217.10 -165.10 165.10 27 258.0100000

June 1350 95.90 1 254.10 1 254.10 1 572 766.810000

July 272 712.40 -440.40 440.40 193 952.160000

August 150 551.40 -401.40 401.40 161 121.960000

September 167 426.60 -259.60 259.60 67 392.160000

October 453 182.90 270.10 270.10 72 954.01000

November 584 306.60 277.40 277.40 76 950.760000

December 350 461.30 -111.30 111.30 12 387.690000

January 440.0

39
MAD 379.29

MSE 248 848.133333

Table #12: Forecasted Sales for HBW White Board Marker - Black

using Weighted Average Method

Figure #12: Graph of Forecasted Sales for HBW White Board Marker - Black

using 4 Month Average Method

B. Labor Productivity

In order to compute the productivity of workers, the group will use the labour

productivity method. Therefore, the group may assess whether using computer systems for

40
operational purposes would be advantageous to the company. In addition, the number of outputs

produced by workers who are assisted by computer systems will be compared to the number of

outputs produced by workers who are not assisted by computer systems. Below are the solutions

to problems such as workers with computer systems and those workers without computer

systems.

Some factors that should be taken note of:

Worker’s shift per day = 8 hours

Unit cost = Php. 2.50

Number of Computer Systems provided = 3 computers

a. With Computer Systems

No. of workers with No. of outputs per No. of outputs per Cost of units

computer systems day worker produced per day

(in units) (in pesos)

3 450 450/3 = 150 Php. 1125

Table 13: Labor Productivity with Computer Systems

No. of outputs per No. of workers Time Labor Productivity

day

450 3 8 450/(3*8) = 18.75

41
 b. Without Computer Systems

No. of workers No. of outputs per No. of outputs per Cost of units

without computer day worker produced per day

systems (in units) (in pesos)

7 800 800/7 = 114 Php. 2000

Table 13: Labor Productivity without Computer Systems

No. of outputs per No. of workers Time Labor Productivity

day

800 7 8 800/(7*8) = 14.28

V. Analysis of Results

A. Forecasting

A.1. Forecasting Sales based on data from 2020

Given the results of different forecasting methods, the analysis will be based on the

forecasting errors of MAD and MSE. MAD and MSE are used to determine the accuracy of each

forecasting method. Therefore, when measuring the accuracy of each forecasting method, the

MAD and MSE values should be lower, suggesting better results.

Using the naive method for forecasting sales based on data from 2020, the results show

that the MAD is 14,480.85 and MSE is 887,722,024.83. However, using the 4 month moving

average method, the MAD is 17,859.96 and MSE is 524,599,660.93. This shows that the values

42
are higher than the naive method. On the other hand, using the weighted average method, the

MAD is 20,779.63 and MSE is 717, 500,706.33. This shows the values are higher than the naive

method and 4 month average method. With all the values of each forecasting method, it can be

inferred that Naive Method has the least value which suggests that it has better results and more

accuracy compared to the 2 forecasting methods. With this, the method can be the basis of the

company if they are maximizing their profits by ensuring that they have enough products for

their customers rather than overstocking them which may result in a loss for the company.

A.2. Forecasting Sales for HBW 9801 Black

Based on the results of the naive method of forecasting sales for HBW 9801 Black, it

shows that the MAD is 217.55 and MSE is 67,169.73. However, the 4 month moving average

method provides the values of 176.5 and 88,870.03 for MAD and MSE, respectively. This

indicates that the method has lower value than the naive method. Whereas, the values of the

weighted average method resulted in a MAD of 588.31 and MSE of 401,735. It can be observed

that the 4 month moving average method is the best forecasting method in this case since the

MAD has the lowest value, indicating that the results are better and more accurate than the other

three forecasting methods. Hence, the company can use this method to analyze the sales of the

product, specifically HBW 9801 Black. This is to help the company determine whether they

should continue to purchase the product or reduce the expenses in order to invest in other

products that they believe will benefit them.

A.3. Forecasting sales for Paper Fox White Envelope - Short

43
 Naive Forecast - Last
Forecasted Month
Value Method

August 63

September 61

October 94

November 867

December 500

Moving Average
Forecasted Month
Method - 4 Months

August 408

September 392

October 291.5

November 74.75

December 271.25

Weighted Moving
Actual
Forecasted Month Average (0.2, 0.3,
Sales
0.5)

May 463

June 961

July 81

August 63 421.4

44
 September 61 248

October 94 65.6

November 867 77.9

December 500 473.9

As per the Naive forecasting method, specifically the last value method, the forecast

values are merely the exact same values of the actual sales prior. Furthermore, as per the moving

average method, the forecast values are the means/averages of the actual sales 4 months prior to

the month/s being forecasted. It is notable, though, that compared to the naive forecasting

method, the values are very much far from each other.

Finally, the weighted moving average given the weights 0.2, 0.3, 0.5 are presented above,

and interestingly, the results are closer in value to that of the moving average rather than that of

the naive method. Nevertheless, among the three, concluding the best method will require the

waiting of the actual months to come to compute the errors.

A.4. Forecasting sales for HBW White Board marker - Black

Naive Forecast
Forecaste
- Last Value
d Month
Method

August 150

September 167

October 453

November 584

45
December 350

Moving
Forecaste Average
d Month Method - 4
Months

August 445.75

September 456

October 484.75

November 260.5

December 338.5

Weighted
Forecaste Actual
Moving Average
d Month Sales
(0.2, 0.3, 0.5)

May 52

June 1350

July 272

August 150 551.4

September 167 426.6

October 453 182.9

November 584 306.6

December 350 461.3

46
 Similar to the previous dataset being forecasted, Naive method is rendered, having the

exact same values put to forecast. As for the moving average method, actual sales 4 months prior

to whatever forecasted month asked are averaged to assume/project the future sales of the said

month. Lastly, the weighted moving average with the sum of product weights of 0.2 to three

months before the forecasted month, 0.3 to two months before, and 0.5 one month before as the

forecast for the said month.

B. Labor Productivity

After computing the labor productivity of the workers with computer systems and the

workers without computer systems, the results have shown that by utilizing computer systems

the workers are more productive. This may be caused by the fact that using a systemized

machine may be more time efficient when producing outputs. The workers who have the luxury

of using computer systems have a labor productivity of 18.75%, while those who are not given

computer systems have a labor productivity of 14.28%.

VI. Recommendations & Suggestions

Looking at the results of the different forecasting methods and labor productivity method

used, the group would recommend for Paper and More Inc. to apply the following; (1) for over

all sales, apply the naive method in forecasting monthly sales as the results from the data given

showed this method with the least MAD value at 14,480.85. Applying this method will allow the

company to purchase inventory accordingly.

47
 Since the company highlighted their best sellers (HBW 9801 Black pen, Paper Fox White

Envelope, and HBW White Board marker, the group also conducted a forecast study on the sales

per month in units to help Paper and More Inc. in their decision making when ordering inventory

from their suppliers for each month. (2) For purchasing of inventory, the group suggests using

the 4 month moving average method in forecasting the sales in units of the top 3 products as it

generated the least MAD value for the majority of the products. For the HBW 9801 Black Pen,

the results from the data given showed the 4 month moving average with the MAD value at

176.5, compared to that of the naive method (217.55) and of the weighted moving average

method (588.31). For the Paper Fox White Envelope, the results from the data given showed 4

month moving average with the MAD value at 367, compared to that of the naive method

(336.17) and of the weighted moving average method (342.99), the reason the group decided to

suggest the 4 month moving average instead of the naive method, even if the latter had the least

MAD value can be broken down into two reasons, first is Paper and More Inc, currently does not

use any such forecasting methods thus the group wanted to pick one method they could apply to

help them in their decision making when buying inventory for the top products, so it is user

friendly and easy to incorporate in their business activity. Second is after analyzing the data for

the Paper Fox White Envelope, the differences in MAD value of all methods applied aren't as

significantly diverse compared to that of the other 2 products. For the HBW White Board

Marker, the results from the data given showed the 4 month moving average with the MAD

value at 312.66, compared to that of the naive method (339.27) and of the weighted moving

average method (379.29).

Paper and More Inc, currently has 6 workers assigned to count, arrange, and sort the

inventory in the repacking department on a daily basis, half of whom do not have access to

48
computer systems. (3) For labor productivity of workers in the repacking department, the group

suggests purchasing 3 more computers as it significantly increases the productivity rate of

workers. The data provided from the company already stated that the individual productivity rate

of workers with computers is 31.57% higher than those without. The data gathered supports this

as it was determined that the number of outputs in a day for each worker with computers is 150,

while the number of outputs in a day for each worker without computers is 114.

References:

Corporate Finance Institute. (n.d.). Moving Average. Retrieved

from https://corporatefinanceinstitute.com/resources/knowledge/other/moving-average/

Prado, P. (2018, May 25). Top school supplies stores in Metro Manila 2018. Yoorekka

Philippines. Retrieved from

https://yoorekka.com/magazine/metro-manila/2018/05/25/top-school-supplies-stores-in-

metro-manila-2018

Statistica Research Department. (July 28, 2021). Facts and statistics on coronavirus

(COVID-19): impact on the retail industry worldwide. Retrieved from

https://www.statista.com/topics/6239/coronavirus-impact-on-the-retail-industry-worldwid

e/

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Vader, R. (2021). The realities of retailing in a COVID-19 world. Retrieve from

https://home.kpmg/xx/en/home/insights/2020/03/realities-of-retailing-in-covid-19-world.

html

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