PROJECT SUBMISSION

Task 1
● Method of forecasting: Simple Exponential Smoothing method
● Justification for the choice of method: By looking at last year’s sales data of TechHub
Electronics, we can analyze that past data neither exhibit stable trend nor we are
required to be responsive to latest change in data i.e., seasonality or the sudden change
in demand. We have chosen simple exponential smoothing as method of forecasting
because this methos is suitable when we need the short term forecast that is sensitive to
recent changes. Also, we could not see any seasonality or a clear trend in the last years
sales data of TechHub Electronics.
● Assumption: One assumption we can make is that there should not be any random
component involved, which will impact effective and accurate forecasting.

Task 2

● The formula used for forecasting demand by Simple Exponential Smoothing method
is:

Ft+1=αAt+(1−α) Ft, where

Ft+1: Forest for the next period

At: Actual demand in present period

Ft: Forecast for present period

α is smoothing constant between 0 and 1. This is case α=0.3

● The demand forecast for the next six months is shown in the table below.

Forecasted demand
Month Smart phone Laptop Smart watch
January 1500 800 300
February 1530 806 303
March 1611 834 308
April 1698 860 315
May 1698 857 313
June 1789 900 324
 Task 3

● The formula used for calculating forecast errors: The formula used for calculating
forecasting errors is given below:

Forecasting error = (Actual demand - Forecast demand) * 100 / Actual demand

● The forecast errors for the six months are shown in the table below:

Actual Demand Forecasted demand Forecasting error

Month Smart Smar Smart Smart Smart Smart

Laptop Laptop Laptop
phone t watch phone watch phone watch

January 1600 755 259 1500 800 300 6% -6% -16%

February 1649 865 292 1530 806 303 7% 7% -4%
March 1569 877 250 1611 834 308 -3% 5% -23%
April 1750 923 214 1698 860 315 3% 7% -47%
May 1920 1000 200 1698 857 313 12% 14% -57%
June 2040 1100 196 1789 900 324 12% 18% -65%

Task 4
● The formula for calculating MAPE: The formula used for MAPE (Mean absolute
percentage error) is given below:

● MAPE for all product categories for the six months:

Absolute percentage error
MAPE for six months
(APE)
Smart Smart
Month Laptop Smart phone Laptop Smart watch
phone watch
January 6% -6% -16%
February 7% 7% -4%
March -3% 5% -23% APE b/w 6% to 12%, APE b/w -6% to 18% APE b/w -65% to -4%,
April 3% 7% -47% MAPE is 6% MAPE is 8% MAPE is -35%.
May 12% 14% -57%
June 12% 18% -65%
6
6% 8% -35%
Months
 ● The formula for calculating Bias: The formula use for bias is given below:

● Bias for all product categories for the six months:

Actual Demand Forecasted demand (Forecast- realization) Cumulative difference

Smart Smart Smart Smart Smart Smart Smart Smart
Month phone Laptop watch phone Laptop watch phone Laptop watch phone Laptop watch
January 1600 755 259 1500 800 300 -100 45 41 -100 45 41
February 1649 865 292 1530 806 303 -119 -59 11 -219 -14 52
March 1569 877 250 1611 834 308 42 -43 58 -177 -57 110
April 1750 923 214 1698 860 315 -52 -63 101 -229 -120 211
May 1920 1000 200 1698 857 313 -222 -143 113 -451 -263 324
June 2040 1100 196 1789 900 324 -251 -200 128 -702 -463 452
6
Months -702 -463 452

Task 5
● Recommendations and justifications:

(a) The Positive smart watch bias indicates optimistic forecasting.

The current market trend on customer reviews and data trends on social media
platforms may change the demand as technology changes rapidly and production must
adapt the change in demand. The collaborating with retailers for an effective and
accurate demand planning. The supply chain managers need have good relationship
with internal customers i.e. Finance, Sales, and Manufacturing teams to seek their
support in selecting best vendors and distribution partners and maintain good
relationship with both internal and external customers.

(b) Negative smartphone bias indicates pessimistic drift of forecast.

Considering volatile nature of smartphone market, we can have multiple suppliers with
good relationships to ensure the supply on time and avoid the dependency on single
source.
We can reduce dependency on dependency single source of supply to be avoided short
supply of required items to situation of production losses which will result is sales loss.
We can apply qualitative and quantitative forecasting techniques i.e., consensus,
historical data, market research etc.
(c) Negative Laptop bis is an indicator of pessimistic drift of forecast.
We need to keep in mind, the time for production and sufficient inventory planning of
SKU’s. Also based on seasonal factors, the sales trends, the inventory management
systems like “just in time” can be implemented for efficient supply chain. The “just in
time” was introduced by Toyota, same can also utilized for finish goods movement for
manufacturing location to distribution warehouse to retailers.