CHAPTER ONE

Introduction
1.1 Background of the Study
The research work on Sales-Forecasting System is a sales system using linear regression model
to forecast sales of products in an organization. It can be highly beneficial for companies to
develop a forecast of the future values of some important metrics, such as demand for its
product or variables that describe the economic climate. There are different methods of making
forecasts, but they all fall into two categories: causal methods and time-series methods,
Andrew Gellert (2013). Linear regression is a time-series method that uses basic statistics to
project future values for a target variable, Andrew Gellert (2013). All organizations, big or small,
have at their disposal men, machines, money and materials, the supply of which may be
limited, Gupta and Hiza (2008). If the supply of these resources were unlimited, the need for
management tool like linear programming would not arise at all. Supply of resources being
limited, the management must find the best allocation of its resources in-order to maximize the
profit or minimize the loss or utilize the production capacity to the maximum. However, this
involves a number of problems which can be overcome by quantitative methods, particularly
the linear programming.
Forecasting is the process of making predictions of the future based on past and present data
and analysis of trends. Sales forecasting is the ability to forecast future sales base on past
months sales. Sales forecasting system uses several proven models such as qualitative versus
quantitative model, average approach model, casual/econometrics forecasting model, linear
regression model etc., and these models are proven models used over the years by different
financial institutions. Chapter one introduces the research work and the problem definition of
the research, and to know the aim of this research work, research justification tells us why it is
important to research on this topic; it also covers areas like scope and limitation of study which
entails the boundary of this work. Definition of terms gives the summary what each chapter
entails.

1.2    STATEMENT OF THE PROBLEM

This research work was undertaken to uncover some of the problems with conventional sales
forecasting management systems. Where an accountant has to calculate using a specific sales
model formula in forecasting on a regular basis. Using these conventional methods pose lots of
constraints on sales forecasting as it takes lots of time forecasting using which ever model
adopted by the sales manager or accountant or financial adviser.
The investigation done revealed that workers manually do the record keeping for forecasting.
The manual system is outdated in terms of speed of processing and accuracy. This results into
wastage of time and inefficiency in production.
1.3 SIGNIFICANT OF THE STUDY
 Produces intelligent sales forecasts, more quickly, more effectively than one of the
tedious manual processes associated with using spreadsheets for the forecasting of
demand.

 Rapid Implementation: The application can be implemented very quickly. Data can be
sourced from any ODBC/OLEDB data source or from flat files.

 Forecast revenue and profit as well as quantities: The computer based sales forecasters
allow forecasts to be made not just for volume, but also for selling prices, cost of goods,
etc.

 A versatile software tool: Empowers your forecasters to productively forecast, plan and
re-plan sales, prepare budgets, monitor, review and report, all within a single and easy
to use system.

1.4 AIM AND OBJECTIVES

Sales forecasting is the prediction of future sales performance based on previous sales history,
upcoming events, statistical analysis or anything else that may influence sales. The project is
aimed at developing a computer based application that plan purchasing and inventory system
of a company. Sales forecasting is an important tool used by many businesses to fulfill several
objectives. Some of these objectives are:

 To develop a software that serves as the basis of marketing or sales planning.

 To design a system that helps in financial planning and reporting or budgeting.

1.5 SCOPE OF THE STUDY

What is required is a system that supports judgment forecasting, which takes the drudge out of
retrieving and analyzing data, and which allows sales marketing managers, finance managers
and general managers to work cooperatively on their components of the forecasting, planning
and review process, within a common, shared but secure systems environment.

1.6    Organization of the Work

The work is segmented into five chapters: Chapter one contains the introduction of the
research, statement of problem, significance of the study, aims and objectives, scope of the
study, organization of work and the definition of terms. Chapter two contains the literature
review. Chapter three contains research methodology: design consideration and design
architecture. Chapter four contains the implementation and evaluation: system hardware
requirements, system software requirements, data source, implementation procedure,
algorithm, sample implementation input snapshot, sample implementation output snapshot,
evaluation results, and discussion of results. Chapter five contains discussion and conclusion.
1.7    Definition of Terms

Amiss: Inappropriate or out of place.

Contingency: A future event or circumstance which is possible but cannot be predicted with
certainty.

Chronological: A record of events following the order in which they occurred.

Linear Regression: A statistical analysis that shows the relationship between two variables.

Methodology: A system of methods used in a particular area of study.

Minimize: To reduce something to the least possible amount.

Maximize: To increase to the greatest possible amount or degree.

Minimum: The lowest known or lowest possible number, quantity or degree.

Optimistic: Hopeful and confident about the future.

Product: Anything that can be offered to a market that might satisfy a want or need. In
retailing, products are called merchandise. In manufacturing, products are bought as raw
materials and sold as finished goods.

Prediction: A statement about an uncertain event.

Pragmatism: A philosophical movement that includes those who claim that an ideology or
proposition is true if it works satisfactorily, that the meaning of a proposition is to be found in
the practical consequences of accepting it and that unpractical ideas are to be rejected.

Quantitative: It refers to a type of information based on quantities or else quantifiable data

(objective properties) as opposed to qualitative information which deals with apparent qualities
(subjective properties).

Sales: The act of taking goods or services which have value and contribute to the utility of an
individual to the market.

Variable: It is a characteristic, number or quantity that increases or decreases over time, or

takes different values in different situations.