INDIAN INSTITUTE OF MANAGEMENT – LUCKNOW

IPMX 2022-23

Project Report
Supply Chain Management & Analytics
Topic- Forecasting the Segment-wise domestic passenger
vehicle sales of Maruti Suzuki India Limited

SUBMITTED TO: PROF. S. VENKATARAMANAIAH & PROF. RAHUL PANDEY

SUBMITTED BY:

Name Roll Number

ARUNESH MITTER IPMX15011
HARSH ASTHANA IPMX15018
SIMRAN DEEP SINGH IPMX15049
RAHUL DAS IPMX15089
SANDEEP TIWARI IPMX15095
SHIVAM SHARMA IPMX15101
1. Executive Summary
In this era, especially after covid-19, we have come to realize the importance of
resilient supply chains for improving the production and sales of a company’s
products. The objective for any company is to maximise the shareholder’s wealth
by improving the operating profit margin, overall sales volumes or by acquiring
companies through mergers and acquisitions. One such sector that was struck
because of the supply chain uncertainty was Indian automotive industry, which
battled with the uncertain supply of electronic components critical to produce the
passenger vehicles. We have picked the largest passenger vehicle manufacturer
of India, Maruti Suzuki India Limited.

This report focuses on improving the overall sales volumes and market share of
Maruti Suzuki by accurately forecasting the sales of different segments of vehicles
manufactured by the company. We have divided the segments of vehicles
produced by the company into Mini, Compact, Mid-size, Utility, and Vans and
gathered the data of segment wise sales of the company by studying the
company’s annual reports. Our Analysis includes the forecast of sales of
passenger vehicles using various methods. The accurate monthly forecasts will
lead to prior preparedness as shortage of vehicles leads to customer churn,
planning between the contractual and fulltime manpower, optimizing the overall
inventory to balance between the holding and production costs, planning of
warehouses, selection of dealers and choosing the location of dealers for improved
sales of the vehicles.

The report finds that for all the five segments and total sales, holt winter method
gives the best forecast value based on least mean absolute deviation. Based on
holt winter method, we have again forecasted the sales for next 24 months.

The limitations of the report are the data collected is through secondary sources,
Maruti Suzuki Annual reports and is not exhaustive i.e., we have looked at the sales
volumes of last 6 years and tried the methods such as exponential smoothening,
moving average etc. for accurate forecast of sales of vehicles for each segment.

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2. Company Overview
Maruti Suzuki India Limited (MSIL) is a subsidiary of Suzuki Motor Corporation,
Japan and is currently the largest passenger car manufacturer in India.

Maruti Suzuki India Limited (MSIL) was incorporated as Maruti Udyog Limited in
February, 1981, which was a joint venture between the Indian government and
Suzuki Motor Corporation, Japan. At present, Suzuki Motor Corporation, the
promoter of the company owns equity of 56.2% (Maruti Suzuki)

Since 1981, Maruti Suzuki has led the automobile revolution in India. The firm is
primarily into the business of manufacturing and sale of passenger vehicles in
India. Toyota Motor Corporation (Toyota) and Suzuki Motor Corporation
(Suzuki) have entered a memorandum of understanding in 2017 for collaboration
to enhance the production of electric vehicles, the global supply chain and
production of new SUV models by combining the strengths of Toyota Motors and
Maruti Suzuki India Limited (Toyota, 2022)

The company is the largest passenger vehicle manufacturer with a share of over
40% in the domestic market and the largest passenger car exporter of India with a
record export of 238,376 vehicles in FY22 (Business Standard, 2022). The
company has been exporting vehicles since 1986 and has cumulatively exported
more than 2,250,000 vehicles. Maruti Suzuki possesses manufacturing plants in
Gurgram and Manesar in the state of Haryana and one of its kind, futuristic, R&D
centre in Rohtak, Haryana.

Maruti Suzuki India Limited (MSIL) made humble beginning with the manufacturing
of the iconic Maruti 800 car. Today, Maruti Suzuki boasts of huge portfolio of 16
models and over 150 different variants.

The company’s products include the entry level mini cars such as Alto 800 and S-
presso, the mid-level compact cars such as Ignis, Swift, Celerio, WagonR & Dzire,
mid-size cars such as Ciaz and the utility vehicles such as Ertiga, S-Cross, Vitara
Brezza etc. Recently, the company had also entered the space of light commercial
vehicles with the launch of Super Carry. However, the company has not increased
the portfolio in light commercial vehicles and has very modest sales of Super Carry.

For the FY, 2022, the company posted a modest growth of 13.4% over FY 2020-
21 and had the total sales of 1,652,653 passenger car vehicles in 2022. The total
sales of passenger car vehicles include the sales of domestic passenger vehicles,
light commercial vehicles, vehicles to OEMs and exported vehicles (Maruti Suzuki
Sales Report, 2022). The overall production and sales of vehicles were impacted
by the shortage of chips in FY 2021-22. The sales figures for FY 21 and FY 22
have been shown in the table below.

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The project scope is limited to sales figures of all product categories in the domestic
passenger vehicles only.
The total sales volumes of Maruti Suzuki for past 7 years have been shown as
below:

Hence, Maruti Suzuki has been the leader in Indian automobile industry and has
created overall customer satisfaction and has been one of the largest recruiters for the
Indian youth and is a company of national importance.
2019-2020: Sales degrowth due to economic slowdown, weak rural demand, low
consumer sentiments and changeover to the BS-VI emission regime.
2020-2021: Sales degrowth due to COVID-19 pandemic
2021-2022: Low sales due to shortage of semiconductors which created supply
shortages and impact of COVID-19 pandemic

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Maruti Suzuki Sales Forecast

Objectives and Prerequisites

To forecast the monthly sales of Maruti Suzuki across various segments like Mini,
Compact, Mid-Size, Utility and Vans.

Problem Description
Sales forecasts are important because they allow businesses to make informed
decisions about their operations. By forecasting sales, businesses can estimate how
much revenue they are likely to generate in the future, which can help them plan for
expansion, develop new products, and make other strategic decisions. Additionally,
sales forecasts can help businesses identify potential problems and take corrective
action before they become more serious.

Solution Approach
There are many different approaches to forecasting, and the best approach will
depend on the specific situation and the type of data being used. Some common
approaches to forecasting include time-series analysis, regression analysis, and
causal modelling.
We have taken past 72 months sales data across all segments and have used
various forecasting methods to predict the sales across those segments. Out of the
obtained forecasted results we have chosen best forecast based on the least MAD.

S.No. Year Month Year_Month Mini Compact Mid Size Utility Vans Total
1 2022 Nov Nov 2022 18251 72844 1554 32563 7183 132395
2 2022 Oct Oct 2022 24936 73685 1884 30971 8861 140337
3 2022 Sept Sept 2022 29574 72176 1359 32574 12697 148380
4 2022 Aug Aug 2022 22162 71557 1516 26932 11999 134166
5 2022 July July 2022 20333 84818 1379 23272 13048 142850
6 2022 June June 2022 14442 77746 1507 18860 10130 122685
7 2022 May May 2022 17408 67947 586 28051 10482 124474
8 2022 April April 2022 17137 59184 579 33941 11154 121995
9 2022 March March 2022 15491 82314 1834 25001 9221 133861
10 2022 Feb Feb 2022 19691 77795 1912 25360 9190 133948
11 2022 Jan Jan 2022 18634 71472 1666 26624 10528 128924

Model Formulation
Sales data across various segments is taken and various forecasting methods like
moving average, exponential smoothening is used.

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Analysis: Moving Average & Exponential Smoothening
A six-month moving average forecast has been taken for each product class using
the 72 months historical data, followed by exponential smoothening method. The
best forecast method for each product class is then identified.
The data thus obtained is worked upon using incremental values of alpha ranging
from 0.1 to 1 using step value of 0.05, to arrive at the forecast values.

Mini Compact Mid Size Utility Vans Total

3725.33 9598.86 774.69 3037.18 1473.96 14353.15
0.1 4560.78 0.1 10309.47 0.1 979.13 0.1 3320.71 0.1 1665.53 0.1 15284.67
0.15 4291.42 0.15 10009.01 0.15 840.88 0.15 3153.29 0.15 1604.19 0.15 14927.91
0.2 4147.54 0.2 9775.65 0.2 796.35 0.2 3096.42 0.2 1558.99 0.2 14653.25
0.25 4036.24 0.25 9682.27 0.25 779.39 0.25 3068.48 0.25 1539.27 0.25 14429.63
0.3 3934.94 0.3 9635.57 0.3 774.69 0.3 3045.43 0.3 1514.72 0.3 14353.15
0.35 3838.85 0.35 9598.86 0.35 777.96 0.35 3037.18 0.35 1491.69 0.35 14428.51
0.4 3761.70 0.4 9705.19 0.4 784.34 0.4 3047.34 0.4 1475.22 0.4 14531.90
0.45 3733.57 0.45 9849.31 0.45 791.82 0.45 3063.26 0.45 1473.96 0.45 14686.38
0.5 3725.33 0.5 9959.74 0.5 798.35 0.5 3079.22 0.5 1480.26 0.5 14837.21
0.55 3740.46 0.55 10040.29 0.55 804.09 0.55 3099.57 0.55 1488.49 0.55 14982.59
0.6 3775.41 0.6 10109.98 0.6 808.17 0.6 3137.53 0.6 1498.36 0.6 15128.15
0.65 3812.64 0.65 10197.33 0.65 810.32 0.65 3182.99 0.65 1512.76 0.65 15232.42
0.7 3849.90 0.7 10262.47 0.7 810.99 0.7 3228.30 0.7 1534.39 0.7 15302.20
0.75 3892.18 0.75 10304.58 0.75 809.77 0.75 3275.34 0.75 1558.78 0.75 15343.46
0.8 3947.42 0.8 10330.68 0.8 806.81 0.8 3334.28 0.8 1585.97 0.8 15376.05
0.85 4015.46 0.85 10344.78 0.85 802.52 0.85 3396.60 0.85 1616.25 0.85 15434.00
0.9 4080.97 0.9 10361.58 0.9 801.71 0.9 3462.09 0.9 1645.79 0.9 15550.51
0.95 4143.96 0.95 10395.33 0.95 811.35 0.95 3532.70 0.95 1674.58 0.95 15683.26
1 4204.47 1 10458.26 1 825.33 1 3605.44 1 1707.20 1 15866.11

Comp Mid Util

Mini Vans Total
act Size ity
Alpha
0.5 0.35 0.3 0.35 0.45 0.3
Value

Above values are chosen for different segments in exponential smoothening, It is

based on the least Mean Absolute error.
Alpha value is chosen where Mean Absolute error is least.

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Following table shows the Error value obtained using different forecasting methods:

3 Month 6 month Exp Least

MA MA Smoothening Error
Mini 3783.34 4274.78 3725.33 3725.33
Compact 10882.09 10636.46 9598.86 9598.86
Mid Size 826.89 711.40 774.69 711.40
Utility 3156.25 3052.59 3037.18 3037.18
Vans 1476.87 1596.45 1473.96 1473.96
Total 15850.29 16113.74 14353.15 14353.15
Total for individual forecast 14402.98

Based on the Mean Absolute Error obtained in different scenario following methods
are the best for forecasting demand in different segments.
Vehicle
Best method
type
Mini Exponential smoothening, Alpha=0.5
Compact Exponential smoothening, Alpha=0.35
Mid Size 6 Months Moving Average
Utility Exponential smoothening, Alpha=0.35
Vans Exponential smoothening, Alpha=0.45
Total Exponential smoothening, Alpha=0.30

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Analysis: Holt-Winters model

We undertake time series analysis of the sales data, using Holt-Winters model and
use it to forecast the sales for the next two years in R.
The below graphs show the plotting of 72 months of sales data, respectively for each
of the five product classes – mini, compact, mid size, utility & vans, and the total
cumulative sales.

We begin by first decomposing the data for each of the product class & total sales,
with respect to seasonality, randomness, trend and observation.
This data is then fitted into Holt Winters model to arrive at a forecast for the next two
years.

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Product class: Mini

Fitted Values

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Forecast: 2 Years

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Product class: Compact

Fitted Values

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Forecast: 2 Years

12 | P a g e
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Product class: Mid size

Fitted Values

13 | P a g e
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Forecast: 2 Years

14 | P a g e
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Product class: Utility

15 | P a g e
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Forecast 2 Years

16 | P a g e
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Product class: Vans

Fitted Values

17 | P a g e
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Forecast: 2 Years

18 | P a g e
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Total cumulative Sales

Fitted Values

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Forecast 2 Years

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Summary
Holt winter method is used to forecast demand across various segments and the total
demand.
We have calculated MAD for all segments and the total volume. Summary for the same
is given below:

Mid
Segment Mini Compact Utility Vans Total
Size

MAD 3719.97 9431.11 688.63 2968.9 1449.27 14158.06

From the above table we can see that the mean absolute deviations obtained for all
the segments is least for Holt Winter method as compared to other method discussed
above. Hence forecast value for next 24 months is obtained using Holt Winter Method
for all the segments.

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