Case Name A CAT Corp.

: Forcasting

Group No : 8
Particpant Name

# Roll No Name
1 2023EXEMBA03 Anupam Mandal
2 2023EXEMBA08 Bablu Kumar Patel
3 2023EXEMBA14 Hemanta Kumar Mardi
4 2023EXEMBA30 Shakti Nanda
5 2023EXEMBA32 Siddharth Shankar Pujari

Report to be submitted to Prof Rohit Gupta, IIM Sambalpur

Case Summary

Company Background
Case about How A Cat Copr started business in 1986 who is a leading producer of electric producer
in India, medium scale industry, mainly focused on Rural population of Vidarba Region.
It has alliance in business firm like Juptiar Inc & Global Venture. Employee Strength is 40 Nos. Primary
functional dept -Purchase, Design, Manufacturing and Sale Dept.

Its primary flagship product a voltage regulator of 500 KVA (Brand VR 500)

Issues

The sales of Voltage Regulator has fallen in last few months

Assessing policy in purchasing and stocking spares and components and inventory management
Stocks of Transformer is not matching with the demand - under stocking or overstocking
Supplier rasing concerns on the happazard manner ordering
Sluggish year on year growth rate as compared to the competitors
Limited supplier - instead of 4 it has reduced to 1
Rasing prices if prices are ununiform

in summary - improper forecasting of demand and poor inventory mangement resulting sluggish growth

Assignment Objectives:

Analysis of reference data, forecasting the next order of vital item like trasnformer by applying different forecasting
method. Identifying the errors and recommendations based on the analysis
ent forecasting
Exibit-1
Transformer Requirements during this period ( Taken from the sale of Voltage Regulator)

Period 2006 2007 2008 2009 2010

Jan 779 845 857 917 887
Feb 802 739 881 956 892
Mar 818 871 937 1001 997
Apr 888 927 1159 1142 1118
May 898 1133 1072 1276 1197
Jun 902 1124 1246 1356 1256
Jul 916 1056 1198 1288 1202
Aug 708 889 922 1082 1170
Sep 695 857 798 877 982
Oct 708 772 879 1009 1297
Nov 716 751 945 1100 1163
Dec 784 820 990 998 1053

Exibit-2
Sales figures of Refrigetor
quarter 2006 2007 2008 2009 2010
1 3832 4007 4826 5411 6290
2 5032 5903 6492 7678 8332
3 3947 4274 4765 5774 6107
4 3291 3692 4972 6007 6729
Historical Data Analysis

1600
Period 2006 2007 2008 2009 2010
Jan 779 845 857 917 887 1400

Feb 802 739 881 956 892 1200

Mar 818 871 937 1001 997
1000
Apr 888 927 1159 1142 1118
800
May 898 1133 1072 1276 1197
Jun 902 1124 1246 1356 1256 600

Jul 916 1056 1198 1288 1202 400

Aug 708 889 922 1082 1170
200
Sep 695 857 798 877 982
0
Oct 708 772 879 1009 1297 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nov 716 751 945 1100 1163 2006 2007 2008 2009 2010
Dec 784 820 990 998 1053
9614 10784 11884 13002 13214
Growth 1170 1100 1118 212 Trasnformer ReQ-2006
% 12% 10% 9% 2%

916
902
898
888
818
802

784
779

716
708

708
695
Observations

Seasonal Variations
J an Feb Mar Ap r May Jun Jul Au g Sep Oc t Nov D ec
Peak Seasons: The months of April through July are the peak demand seasons, which could
be linked
to the onset of summer and higher use of voltage-dependent appliances Trasnformer ReQ-2007

1133

1124

1056
927

889
871

857
845

820
772

751
739
Low Seasons: Demand significantly drops in August, possibly due to monsoon season in
India, which might reduce the usage or purchase of electrical appliances.
Lowest demand is seen at the beginning and end of the year, with January , Feb & Sep
J an Feb Mar Ap r May Jun Jul Au g Sep Oc t Nov D ec

Trasnformer ReQ-2008

1246

1198
1159
Year-on-Year Growth

1072

990
945
937

922
881

879
857

798
The year-on-year growth rate in demand shows a declining trend in growth percentages,
although the demand itself is increasing.
The growth from 2006 to 2007 was approximately 12%. J an Feb Mar Ap r May Jun Jul Au g Sep Oc t Nov D ec
The growth from 2009 to 2010 slowed down to approximately 2%. However, in last five year
growth incresed from 9614 to 13214
Trasnformer ReQ-2009

1356

1288
1276
1142

1100
1082

1009
1001

998
956
917

877
Year-on-Year Growth
1400 0.14 J an Feb Mar Ap r May Jun Jul Au g Sep Oc t Nov D ec
1200 0.12
1000 0.1
800 0.08 Trasnformer ReQ-2010

1297
1256

1202
1197

1170

1163
1118

600 0.06

1053
997

982
400 0.04
892
887

200 0.02
0 0

Growth %
J an Feb Mar Ap r May Jun Jul Au g Sep Oc t Nov D ec

Recommendations
Increase Inventory Before Peak Season: A-CAT Corp. should consider increasing its transformer inventory before the peak season starts (around February to March) to
accommodate the increased demand without facing stockouts.
Review and Adjust Post-Peak Inventory: After the peak season, especially post-July, inventory levels should be carefully adjusted to prevent overstocking, considering the
significant drop in demand in August
The current forecasting methods used by A-CAT and their limitations

The company was estimating the number of transformers needed based on the sales figures of the last two to three
combined with the sales figures from the same months in the previous two years. This method appears to blend ele
series analysis (looking at recent and seasonal past data) with a form of qualitative judgment (estimating future nee
recent past sales).

Limitations of the Current Forecasting Method

It potentially overlooks deeper insights that could be gleaned from the data, such as cyclic trends, outlier impacts, o
growth deceleration observed in recent years
The method seems to lead to situations where the company either ends up with excess inventory (overstocking) or
meet production needs (stockouts)
 es of the last two to three months
thod appears to blend elements of time
ent (estimating future needs based on

trends, outlier impacts, or the rate of

ventory (overstocking) or not enough to

Applying different forecasting techniques

A) Naive Approach
In a naive approach, the forecast for the next period is simply the actual demand of the current period. This method assumes

Naive Approach forecast for

last three year( say)
Period 2006 2007 2008 2009 2010 2008 2009 2010

Jan 779 845 857 917 887 845 857 917

Feb 802 739 881 956 892 739 881 956
Mar 818 871 937 1001 997 871 937 1001
Apr 888 927 1159 1142 1118 927 1159 1142
May 898 1133 1072 1276 1197 1133 1072 1276
Jun 902 1124 1246 1356 1256 1124 1246 1356
Jul 916 1056 1198 1288 1202 1056 1198 1288
Aug 708 889 922 1082 1170 889 922 1082
Sep 695 857 798 877 982 857 798 877
Oct 708 772 879 1009 1297 772 879 1009
Nov 716 751 945 1100 1163 751 945 1100
Dec 784 820 990 998 1053 820 990 998
11884 13002 13214 yearly 12792 13893 15012

Obervations
Variability in Error: The percentage errors vary significantly across different months and years, indicating fluctuations in the ac
capture.
Certain months, like March and May, show relatively small errors across the years, suggesting some stability in demand patter
unpredictability.

Trend Over Years: While the average error in 2008 is 7%, it slightly decreases in 2009 to 6%, and then significantly increases in
unpredictability in demand or changes in market conditions not reflected in past data
riod. This method assumes that what happened in the current period is the best predictor of what will happen in the next period

Forecast
for 2011 Naive Approach Error

2011 2008 2009 2010

Forecasted Actual Error Forecasted Actual Error Forecasted
887 845 857 -12 857 917 -60 917
892 739 881 -142 881 956 -75 956
997 871 937 -66 937 1001 -64 1001
1118 927 1159 -232 1159 1142 17 1142
1197 1133 1072 61 1072 1276 -204 1276
1256 1124 1246 -122 1246 1356 -110 1356
1202 1056 1198 -142 1198 1288 -90 1288
1170 889 922 -33 922 1082 -160 1082
982 857 798 59 798 877 -79 877
1297 772 879 -107 879 1009 -130 1009
1163 751 945 -194 945 1100 -155 1100
1053 820 990 -170 990 998 -8 998
15225 12792 11884 908 13893 13002 891 15012

cating fluctuations in the accuracy of the naive forecasting approach. This suggests that demand for the product is subject to factors that

e stability in demand patterns during these periods. Conversely, months like October and November exhibit larger errors, especially in 201

en significantly increases in 2010 to 12%. This upward trend in error percentage suggests that the naive method's accuracy may be deteri
pen in the next period

Naive Approach Error (% Error)

2010 2008 2009 2010

Actual Error
887 30 -1% -7% 3%
892 64 -19% -9% 7%
997 4 -8% -7% 0%
1118 24 -25% 1% 2%
1197 79 5% -19% 6%
1256 100 -11% -9% 7%
1202 86 -13% -8% 7%
1170 -88 -4% -17% -8%
982 -105 7% -10% -12%
1297 -288 -14% -15% -29%
1163 -63 -26% -16% -6%
1053 -55 -21% -1% -6%
13214 1798 7% 6% 12%

oduct is subject to factors that this simple forecasting method does not

t larger errors, especially in 2010, highlighting periods of significant demand

ethod's accuracy may be deteriorating over time, possibly due to increasing

Applying different forecasting techniques

B) Simple Moving Average Method

This technique is useful when demand is not growing or declining rapidly and no seasonality is
present. Forecast is the average of a fixed number of past periods.

Forecast of SMA

Period 2006 2007 2008 2009 2010 2009 2010 2011

Jan 779 845 857 917 887 827 873 887

Feb 802 739 881 956 892 807 859 910
Mar 818 871 937 1001 997 875 936 978
Apr 888 927 1159 1142 1118 991 1076 1140
May 898 1133 1072 1276 1197 1034 1160 1182
Jun 902 1124 1246 1356 1256 1091 1242 1286
Jul 916 1056 1198 1288 1202 1057 1181 1229
Aug 708 889 922 1082 1170 840 964 1058
Sep 695 857 798 877 982 783 844 886
Oct 708 772 879 1009 1297 786 887 1062
Nov 716 751 945 1100 1163 804 932 1069
Dec 784 820 990 998 1053 865 936 1014
11884 13002 13214 yearly 12769.67 13900 14711

Obervations
There is significant variability in the percentage errors, with some months showing errors as low as -1% and others as high as -
term trends, it may still struggle with abrupt changes in demand or exceptional events
 Forecasting Error % Error

2009 2010 2009

Forecasted Actual Error Forecasted Actual Error
827 917 -90 873 887 -14 -11%
807 956 -149 859 892 -33 -18%
875 1001 -126 936 997 -61 -14%
991 1142 -151 1076 1118 -42 -15%
1034 1276 -242 1160 1197 -37 -23%
1091 1356 -265 1242 1256 -14 -24%
1057 1288 -231 1181 1202 -21 -22%
840 1082 -242 964 1170 -206 -29%
783 877 -94 844 982 -138 -12%
786 1009 -223 887 1297 -410 -28%
804 1100 -296 932 1163 -231 -37%
865 998 -133 936 1053 -117 -15%
12770 13002 -232 13900 13214 686 -2%

s -1% and others as high as -46%. This variability suggests that while SMA can smooth short-term fluctuations and highlight longer-
 % Error

2010

-2%
-4%
-6%
-4%
-3%
-1%
-2%
-21%
-16%
-46%
-25%
-13%
5%

d highlight longer-
Applying different forecasting techniques

C) Weighted Moving Average

This technique is useful when demand is not growing or declining rapidly and no seasonality is
present. Forecast is the average of a fixed number of past periods.

Forecast

Period 2006 2007 2008 2009 2010 2008 2009 2010

Wgt (year 1 Wgt (year 2 Wgt (year 3
=1) =2) =3)

Jan 779 845 857 917 887 840 885

Feb 802 739 881 956 892 821 895
Mar 818 871 937 1001 997 895 958
Apr 888 927 1159 1142 1118 1037 1112
May 898 1133 1072 1276 1197 1063 1184
Jun 902 1124 1246 1356 1256 1148 1281
Jul 916 1056 1198 1288 1202 1104 1219
Aug 708 889 922 1082 1170 875 997
Sep 695 857 798 877 982 801 847
Oct 708 772 879 1009 1297 815 926
Nov 716 751 945 1100 1163 842 990
Dec 784 820 990 998 1053 899 966
11884 13002 13214 yearly 2008 13148 14269.67

Obervations
Seems fair in peak season where as Oct- Dec its showing high variability
 Forecasting Error

2011 2009 2010

Forecasted Actual Error Forecasted Actual Error
892 840 917 -77 885 887 -2
912 821 956 -136 895 892 3
988 895 1001 -106 958 997 -39
1133 1037 1142 -106 1112 1118 -6
1203 1063 1276 -213 1184 1197 -13
1288 1148 1356 -208 1281 1256 25
1230 1104 1288 -184 1219 1202 17
1099 875 1082 -207 997 1170 -174
916 801 877 -77 847 982 -135
1131 815 1009 -194 926 1297 -371
1106 842 1100 -258 990 1163 -173
1024 899 998 -99 966 1053 -87
14932.67 13148 13002 146 14270 13214 1056
 % Error

2009 2010

-9% 0%
-17% 0%
-12% -4%
-10% -1%
-20% -1%
-18% 2%
-17% 1%
-24% -17%
-10% -16%
-24% -40%
-31% -17%
-11% -9%
1% 7%
Applying different forecasting techniques

D) Exponential Smoothing
It is a weighted average method that includes all past data in the forecasting calculation. The smoothing constant (α) can
be changed to give more weight
to recent dataAt-4
when the value
At-3 is At-2 At-1 At Fore
high or more weight to past data
Period
when it is low 2006 2007 2008 2009 2010 2007
Ft-1 of
At-1 Ft-4
2006
Jan 779 845 857 917 887 779 779 779
Feb 802 739 881 956 892 802 802 802
Mar 818 871 937 1001 997 818 818 818
Apr 888 927 1159 1142 1118 888 888 888
May 898 1133 1072 1276 1197 898 898 898
Jun 902 1124 1246 1356 1256 902 902 902
Jul 916 1056 1198 1288 1202 916 916 916
Aug 708 889 922 1082 1170 708 708 708
Sep 695 857 798 877 982 695 695 695
Oct 708 772 879 1009 1297 708 708 708
Nov 716 751 945 1100 1163 716 716 716
Dec 784 820 990 998 1053 784 784 784
11884 13002 13214 yearly 11621

Obervations
Seems fair in peak season where as Oct- Dec its showing high variability
 Say Alpha 0.5
Considering Forecasted Sale of 2007-1=2006 is equal to ac

othing constant (α) can

Forecast Forecasting Error

2008 2009 2010 2011 2008 2009

Ft-3 Ft-2 Ft-1 Ft Forecasted Actual Error Forecasted

812 835 876 881 812 857 -45 835

771 826 891 891 771 956 -186 826
845 891 946 971 845 1001 -157 891
908 1033 1088 1103 908 1142 -235 1033
1016 1044 1160 1178 1016 1276 -261 1044
1013 1130 1243 1249 1013 1356 -343 1130
986 1092 1190 1196 986 1288 -302 1092
799 860 971 1071 799 1082 -284 860
776 787 832 907 776 877 -101 787
740 810 909 1103 740 1009 -269 810
734 839 970 1066 734 1100 -367 839
802 896 947 1000 802 998 -196 896
12207 13050.5 14031.75 14628.88 12207 13002 -795 13051
22406 25944 -3538 24092
e of 2007-1=2006 is equal to actual sale of 2006

Forecasting Error % Error

2009 2010 2009 2010

Actual Error Forecasted Actual Error

917 -83 876 887 -11 -6% -1%

956 -130 891 892 -1 -24% 0%
1001 -110 946 997 -51 -19% -5%
1142 -109 1088 1118 -30 -26% -3%
1276 -232 1160 1197 -37 -26% -3%
1356 -227 1243 1256 -13 -34% -1%
1288 -196 1190 1202 -12 -31% -1%
1082 -222 971 1170 -199 -36% -20%
877 -90 832 982 -150 -13% -18%
1009 -200 909 1297 -388 -36% -43%
1100 -261 970 1163 -193 -50% -20%
998 -102 947 1053 -106 -24% -11%
13002 49 14032 13214 818 -7% 6%
26004 -1912 26054 26428 -375
Applying different forecasting techniques

D) Exponential Smoothing
It is a weighted average method that includes all past data in the forecasting calculation. The smoothing constant (α) can
be changed to give more weight
to recent dataAt-4
when the value
At-3 is At-2 At-1 At Fore
high or more weight to past data
Period
when it is low 2006 2007 2008 2009 2010 2007
Ft-1 of
At-1 Ft-4
2006

Jan 779 845 857 917 887 779 779 779

Feb 802 739 881 956 892 779 802 791
Mar 818 871 937 1001 997 791 818 804
Apr 888 927 1159 1142 1118 804 888 846
May 898 1133 1072 1276 1197 846 898 872
Jun 902 1124 1246 1356 1256 872 902 887
Jul 916 1056 1198 1288 1202 887 916 902
Aug 708 889 922 1082 1170 902 708 805
Sep 695 857 798 877 982 805 695 750
Oct 708 772 879 1009 1297 750 708 729
Nov 716 751 945 1100 1163 729 716 722
Dec 784 820 990 998 1053 722 784 753
11884 13002 13214 yearly 11646.77

Obervations
Seems fair in peak season where as Oct- Dec its showing high variability
 Say Alpha 0.5
Considering Forecasted Sale of 2007-1=2006 is equal to a

othing constant (α) can

Forecast Forecasting Error

2008 2009 2010 2011 2008 2009

Ft-3 Ft-2 Ft-1 Ft Forecasted Actual Error Forecasted

812 835 876 881 812 857 -45 835

765 823 889 891 765 956 -191 823
838 887 944 971 838 1001 -163 887
887 1023 1082 1100 887 1142 -255 1023
1003 1037 1157 1177 1003 1276 -273 1037
1006 1126 1241 1248 1006 1356 -350 1126
979 1088 1188 1195 979 1288 -309 1088
847 884 983 1077 847 1082 -235 884
803 801 839 910 803 877 -74 801
750 815 912 1104 750 1009 -259 815
737 841 970 1067 737 1100 -363 841
787 888 943 998 787 998 -211 888
12219.88 13056.94 14034.97 14630.49 12220 13002 -782 13057
22432 25944 -3512 24105
le of 2007-1=2006 is equal to actual sale of 2006 of Jan month only

Forecasting Error % Error

2009 2010 2009 2010

Actual Error Forecasted Actual Error

917 -83 876 887 -11 -6% -1%

956 -133 889 892 -3 -25% 0%
1001 -114 944 997 -53 -20% -6%
1142 -119 1082 1118 -36 -29% -3%
1276 -239 1157 1197 -40 -27% -3%
1356 -230 1241 1256 -15 -35% -1%
1288 -200 1188 1202 -14 -32% -1%
1082 -198 983 1170 -187 -28% -19%
877 -76 839 982 -143 -9% -17%
1009 -194 912 1297 -385 -34% -42%
1100 -259 970 1163 -193 -49% -20%
998 -110 943 1053 -110 -27% -12%
13002 55 14035 13214 821 -6% 6%
26004 -1899 26060 26428 -368
Applying different forecasting techniques

E)Linear Regression Analysis

Regression is used to identify thef unctional relationship between two or more correlated variables,usually from observed dat

Forecast
2007 2008 2009

Period 2006 2007 2008 2009 2010

Jan 779 845 857 917 887
Feb 802 739 881 956 892
Mar 818 871 937 1001 997
Apr 888 927 1159 1142 1118
May 898 1133 1072 1276 1197
Jun 902 1124 1246 1356 1256
Jul 916 1056 1198 1288 1202
Aug 708 889 922 1082 1170
Sep 695 857 798 877 982
Oct 708 772 879 1009 1297
Nov 716 751 945 1100 1163
Dec 784 820 990 998 1053
11884 13002 13214 yearly

Obervations
Seems fair in peak season where as Oct- Dec its showing high variability
 0.5

s,usually from observed data.

Forecast Forecasting Error

2010 2011 2008 2009
Forecasted Actual Error Forecasted Actual Error

0 857 -857 0 917 -917

0 956 -956 0 956 -956
0 1001 -1001 0 1001 -1001
0 1142 -1142 0 1142 -1142
0 1276 -1276 0 1276 -1276
0 1356 -1356 0 1356 -1356
0 1288 -1288 0 1288 -1288
0 1082 -1082 0 1082 -1082
0 877 -877 0 877 -877
0 1009 -1009 0 1009 -1009
0 1100 -1100 0 1100 -1100
0 998 -998 0 998 -998
0 13002 -13002 0 13002 -13002
0 25944 -25944 0 26004 -26004
or % Error
2010 2009 2010
Forecasted Actual Error

0 887 -887 #DIV/0! #DIV/0!

0 892 -892 #DIV/0! #DIV/0!
0 997 -997 #DIV/0! #DIV/0!
0 1118 -1118 #DIV/0! #DIV/0!
0 1197 -1197 #DIV/0! #DIV/0!
0 1256 -1256 #DIV/0! #DIV/0!
0 1202 -1202 #DIV/0! #DIV/0!
0 1170 -1170 #DIV/0! #DIV/0!
0 982 -982 #DIV/0! #DIV/0!
0 1297 -1297 #DIV/0! #DIV/0!
0 1163 -1163 #DIV/0! #DIV/0!
0 1053 -1053 #DIV/0! #DIV/0!
0 13214 -13214 #DIV/0! #DIV/0!
0 26428 -26428
Months Data
1/1/2006 779
2/1/2006 802
3/1/2006 818
4/1/2006 888
5/1/2006 898
6/1/2006 902 Actual
7/1/2006 916 1600
8/1/2006 708 1400
9/1/2006 695
10/1/2006 708 1200
f(x) = 0.206265422326445 x − 7196.25178982363
11/1/2006 716 1000
12/1/2006 784
800
1/1/2007 845
2/1/2007 739 600
3/1/2007 871 400
4/1/2007 927
5/1/2007 1133 200

6/1/2007 1124 0
5/28/05 10/10/06 2/22/08
7/1/2007 1056
8/1/2007 889
9/1/2007 857
10/1/2007 772
11/1/2007 751
12/1/2007 820
1/1/2008 857
2/1/2008 881
3/1/2008 937
4/1/2008 1159
5/1/2008 1072
6/1/2008 1246
7/1/2008 1198
8/1/2008 922
9/1/2008 798
10/1/2008 879
11/1/2008 945
12/1/2008 990
1/1/2009 917
2/1/2009 956
3/1/2009 1001
4/1/2009 1142
5/1/2009 1276
6/1/2009 1356
7/1/2009 1288
 8/1/2009 1082
9/1/2009 877
10/1/2009 1009
11/1/2009 1100
12/1/2009 998
1/1/2010 887
2/1/2010 892
3/1/2010 997
4/1/2010 1118
5/1/2010 1197
6/1/2010 1256
7/1/2010 1202
8/1/2010 1170
9/1/2010 982
10/1/2010 1297
11/1/2010 1163
12/1/2010 1053
1/1/2011 -71950.73
2/1/2011
3/1/2011
4/1/2011
5/1/2011
6/1/2011
7/1/2011
8/1/2011
9/1/2011
10/1/2011
11/1/2011
12/1/2011
 Actual Sale

82363

2/22/08 7/6/09 11/18/10 4/1/12