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Forecasting Production of Farmina Bio Plus by Using Markov Chain

Jaspal Singh A/L Suk Dave Singh, Mohamad Amirul Mokhtar, Mohamad Hamizan Hamzah, Mohd Raziman Rasid University of Tun Hussein Onn Malaysia

Abstact: Forecasting is an essential tool in a business no matter if its a large small firm. In economics, decision are often based on forecasts of the upward or downward movements of the production. In this case study, we emphasize that forecasting in terms of production is a way for the management to figure out their market oppurtunity as well as their success in marketing their product. Risk simulator is a tool that can be used to accomplish the forecasting analysis which is conducted using Markov Chain method.

1. Intoduction Background of the study Farmina Bio Plus is an industry and consultant company that sells the product based on the biotechnology and herb using Homeopathic treatment. The company was statured as GMP(Good Manufacturing Practices) which is located in IKS industrial area at Parit Raja, Batu Pahat Johor. Farmina Bio Plus was founded by Dr. (H) Farminah bt Hasan and Dr. (H) Hj. Nasir bin Berau in which they are married to each other. They had experience for 15 years as homeopathic doctor. Before Dr. Farmina involved in homeopathic treatment, she was a counselor for 13 years. She opened the homeopathic clinic since 1991. Furthermore, she is also a consultant that is recognized by the MARA and is currently involved in the Mentor-Mentee Program Retail MARA to produce product base on biotechnology and herb. The Farmina Bio Plus Industries and consultant was established since 15 July 2004.Famina Bio Plus Industries and Consultant also have their own factory that operates in Parit Raja Darat, Batu Pahat Johor. All the madicine produced by Farmina Bio Plus are made by their own staff which have been trained before was eventually appointed as a worker in the firm. All the products were produced by their factory which is based on the biotechnology and herb. So, there are no doubt in using their products because their employees had been trained before. Otherwise, the resources of the product is based on the herb and biotechnology which had been

approved by the SIRIM. So, the standard of the product is eventually controlled and quality of the product also considered excellent. Usually, the company recruited their employees from the postgraduate student in which their major is in homeophatic studies in the university, for example the student from Cyberjaya University College of Medical Sciene in which they have learned about the homephatic treatment there. So, it is easy for the mangement team to train them because they have experience in this field. Moreover, the Farmina Bio Plus also have a homestay which is located in Parit Raja Darat, Batu Pahat Johor. The facilities provided by Farmina Bio Plus are such as bedrooms, hall for seminar, canteen, and many more. The homestay provide the services like motivation lecture, intensive course for industries, and also lecture about the homeophatic treatment.

Now Farmina Bio Plus could stand strong with 8 stokists all arond Malaysia which is in Selangor, Johor, Melaka, Negeri Sembilan, Pahang, Kuala Lumpur, Sabah and Sarawak. Furthermore, they also had added new distributor in several state in Malaysia. They also use the internet application as their medium of distribution of the product and services. Through this effective ways, they eventually expresses high hopes to expand their products and services in entire Malaysia and also in international market. Althought their company are still young an new compared to other companies, but with their vision and mission, they colud achive their goal desired with the right amout of effort. Moto More Natural Healing Vision To excellence and self improvement and economic Mission To become a companys that the service and manufacturing health product is based on the method of Homeophaty, Herbs and, Biochemstry. Providing consultion and treatment services using T & CM(Traditional and Complimentary Medicine). Giving priority to quality Natural to healing. Franchise Program Framina Bio Plus industries and consultant have set their goal to make the company become more improved in terms of organizational strength. There are several goals:

Products available in Farminas company are divided into several fractions of aromatherapy, women care set, empowering the mind sets and other products. Aromatherapy offers three options such the Adam's oil, Farmina Aroma (red), Beauty Oil (perfume). Adam's oil is used to help improve confident in themselves, help the body to add flavour, help eliminates fatigue and tiredness, and helps to refresh the body. The price offered is RM88. While on the other hand, Farmina Aroma used to protect a person from black magic and it used once a day when going out from home. The price offered is RM60. Beauty Oil (perfume) which contains no alcohol is to help improve selfconfidence, sense of fun, to be more stylish and successful. It also helps to raise a happy and emotional positive mood. In addition, it helps to change behaviour to become less aggressive and the price offered is RM25. Women care set includes Kacik Fatimah which serves as the main medium of women, to eliminate body odour, stimulates the female reproductive system (womb), to relieve pain in the joints of the body, refine and tighten skin, internal cleaning of the uterus and women, helping eliminate the discharge , close the vagina, and antiviral agents in the body. The users are required to consume 1 seed 2 times a day and the contents are 30 tablets. Price offered is RM44 in the peninsula, Sabah and Sarawak is RM49, and SD39 in Singapore and Brunei. While the other beauty products which is the Virgin Coconut Oil is priced at RM58, RM40 precious Face Massage Oil, Body Scrub priced RM26, RM18 for Night cream, Day Cream priced at RM18, RM80 and Collagen Cream. Empowering mind set is among Bio Chemic Plus functions to maintain physical health, help preventing chronic diseases, help to restore health, relieve fatigue or provide energy, and avoid stress and boredom. For the children, it is advisable to consume 2 tablets 3 times a day and adults 3 tablets 3 times a day, in which it contains 220 tablets. Price offered in Peninsular Malaysia is RM68, RM71in Sabah and Sarawak, and SD53 in Singapore and Brunei. Moreover, bio-QI is a 'supplement' to the mind and nerves and act to help improve the IQ intelligence and mental as well as physical fitness. It helps to restore the problem related to lack of focus on subjects and careers, poor performance studies, no spirit to go forward, there is no assurance, trouble, erratic thoughts, negative thinking, always having a headache, often feeling unhealthy, and high temper. The price offered is RM47 in Peninsula, Sabah and Sarawak is RM50, and SD35 in Brunei and Singapore. In addition, bio-lingua helps those who face problems in learning foreign language by stimulating the right portion of the brain. Prices offered in Peninsular

1. To expand their product to high level. 2. Provide comprehensive training, operation


support, quality assurance product to create a competitive franchisees and relevant.

3. Provide public awareness about the


Farmina brand and develop a franchise outlet through advertising, promotion, and marketing continues.

4. To develop business and human capital as


well as the franchise to make knowledgeable and skilled entrepreneurs. As they are committed to their goal, Farmina Bio Plus will achieve their target and could be a competitor to other company in this entrepreneurship. Product

Malaysia are RM47, RM50 in Sabah and Sarawak and SD35 in Singapore and Brunei. Furthermore, Bio Sasmat helps those who are weak in science and mathematics by activating the left brain functions. Prices offered in Peninsular Malaysia are RM47, RM50 in Sabah and Sarawak, and SD35 in Singapore and Brunei. In addition, Bio HAZ also helps children who are eventually a slow thinker. Prices offered in Peninsular Malaysia are RM47, RM50 in Sabah and Sarawak, and SD35 in Singapore and Brunei. In addition, there are several other products offered by this company. For example is the Plus Collagen which is used to get energy and beauty. Prices offered in Peninsular Malaysia are RM44, RM49 in Sabah and Sarawak and SD39 in Singapore and Brunei. Meanwhile on the other hand, Farmina Diskette is a tablet-shaped food which provides energy to enable them to conduct daily chores. Prices offered in Peninsular Malaysia are RM25, RM29 in Sabah and Sarawak, and SD19 in Singapore and Brunei. In addition, there are also several types of tea offered which is the Teh Pecah Beling that costs RM15 which is essential to help treat cancer, kidney stones, inhibits cell growth of leukaemia and cancer, and also lower cholesterol levels in the blood. Meanwhile, the Teh Emas Cotek helps to heal from high blood pressure, diabetes, pneumonia, heart failure, and diarrhoea. Besides that, it also helps blood circulation and treats vaginal discharge and menstruation for girls. Services There are two types of services that are performed in the firm which is the alternative service (complimentary traditional medicine) and also homeopathy and herbal products. Alternative services and treatments involving the facial sinus, facial massage, health consultant, consulting in other problems, and self-empowerment mindset and nutrition consulting. While in usage of herbal products and homeopathy have been described previously. For further information: Contact Farmina Bio Plus: Farmina Bio Plus Industries & Consultant Sdn Bhd Slip No 1 Kluang Road/ Parit Raja, 86400 Parit Raja, Batu Pahat, Johor Darul Takzim Tel: 07-453 2910 Fax: 07-454 2159 Email: fhrc_farminabioplus@yahoo.com Blog: http://farminabioplus2.blogspot.com/ Farmina Marketing: http://www.farminamarketing.com/

Branch: Herbalyn Enterprise, No. 42A-1, Road 7/7A, Section 7, 43650 Bdr Baru Bangi, Selangor. 2. Problem statement 1. 2. What is the production rate of the company that maintains its economic advantage? How is the forecasting of the production

being conducted? 3. 4. Why is forecasting important for a firm? How does forecasting helps an organization or firm to identify lackness in terms of production rate?

5. What is Markov Chain in Risk Simulator?


6. How to interprate data using Markov Chain?

3. Methodology Our group which consist of four members eventually paid a visit to Farmina Bioplus Sdn.Bhd that is situated in Parit Raja, Batu Pahat Johor. We were assigned to collect the production data of the firm in order to run our own forecast. Currectly, the firm is eventually a small manufacturing enterprise or is formally known as SME. Thus, they conduct forecasting of their product manually as there are no specialized tool or computerized program to conduct the analysis. We eventually took their current production rate from January 2010 until Disember 2011. The approach that will be used in conducting our forecast will be through the application of Risk Simulator software using Markov Chain method. The Markov Process is useful for studying the evolution of systems over multiple and repeated trials in successive time periods. The systems state at a particular time is unknown, and we are interested in knowing the probability that a particular state exists. For instance, Markov Chains in this research are used to compute the probability

that the production of product will continue and to analyze the overall production forecast. 4. Discussion Analysis of the forecasting base on the Markov Chain Period 0 1 2 3 4 5 State 1 75.00% 67.75% 65.65% 65.04% 64.86% 64.81% State 2 25.00% 32.25% 34.35% 34.96% 35.14% 35.19%

Based on the Markov Chain analysis, there are five periods different data in state 1 and also state 2. The differences were starting from period 0 until period 5. The data showed that from period 0 until period 5 is still not stable. Steady State Probability Market Share: State 1 64.79% State 2 35.21% From the analysis, state 1 show that the forecasting data was stable starting from period 6 until period 50 which is the value is 64.79%. Meanwhile, the state 2 show that the forecasting data was stable also starting from period 6 until period 50 which is the value is 35.21%. The steady state probability of the state 1 (64.79%) and state 2 (35.21%) is result to indicate what would happen if the analysis is performed over much longer period. These steady state probabilities are also indicative of the respective market share. This means, that, overtime and at equilibrium, the state 1 has 64.79% market share as compared to 35.21% market share. State 1 Market Share: 64.79% State 2 35.21% Next Period Current Period State 1 State 2 State 1 75.00% 46.00% State 2 25.00% 54.00%

Period 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50

State 1 75.00% 67.75% 65.65% 65.04% 64.86% 64.81% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79% 64.79%

State 2 25.00% 32.25% 34.35% 34.96% 35.14% 35.19% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21% 35.21%

5. Finding The production rate of the company that maintains its economic advantage are : 2010 JANUARY FEBRUARY MARCH APRIL MAY JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER JANUARY FEBRUARY MARCH APRIL MAY JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER TOTAL 2100 1950 1730 1740 1740 1300 1300 1400 1450 1740 2100 1950 2200 2000 1600 1700 1500 1350 1350 1500 1550 1600 2400 2300 41550

2011

From the production rate, we can forecast the prodcution for the next period. The forecasting of the production is being conducted by using the Risk Simulator which is using the Markov Chains Technique and Model.

otherwise, the five different period also need to be identify.

The forecasting is very important to the firm because product forecasts actively support the delivery of excellent customer service and cost management by ensuring that the right mix of correctly skilled people, stores, budgets and other resources are available when required. Without clear and robust forecasts we cant guarantee we can meet the network needs of you and your customers. Here are just some of the benefits of providing robust and accurate forecasts: 1. We can meet your needs. If you highlight any necessary contingencies, we can factor that in right at the start of the process We can satisfy you and your customers' expectations. An accurate forecast allows us to work with our suppliers to ensure adequate stock availability Collaborative working. Clear forecasts make it easier to see the road ahead and provide us with a strategic view of how we can work together on your future requirements Avoid any pitfalls. Making sure your forecast is accurate means you are more likely to meet your customer's needs without potentially expensive alternatives

2.

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4.

The Markov Process is uesefull for studying the evalution of systems over repeated trails in succesive time period. The systemss state at a particular time is unknow, and we are intrested in knowing the probabilty that a particular state exits. For instance, Markov Chains are used to compute the probabilty that a particular machine or equipment will continue to function in the next time period or whether a consumer purchasing the product A will continue to purchase Product A in the next period or switch to competive bran B. The theory of the Markov Chains is when the probabilty of a future state depend on a previous state and when linked together forms a chain that reverts to long run steady state level. To interprate the data using Markov Chais is required inputs which are the starting probabilty of a customer in the first store (the first state) will return to the same store in the next period, versus the probabilty of switching to a competitors store in the next state. After that, we need to analyze the data and the graph which looking the steady state probability and the period of forecasting. In

By using forecasting technique, it actually help organization and firm to identify the lackness in term of production rate. This because,The forecasting helps an organization to identify the lacknes in term of production rate by analyze the graph of the forecasting data. From the analyzation, the company will know how much they can produce the product in the future. So, they will not produce the product wrongly in the future. The firm also can know the correct time to produce the product. 6. Markov Chain Calculation Step 1: 24 month = total = 20500 + 21050 = 41550 Mean = 41550/ 24 = 1731.25 Step 2:

A1: 1731.25 A2: 1731.25 1731.25 = Jan 2010 + Feb 2010 + April 2010 + May 2010 + Oct 2010 + Nov 2010 + Dec 2010 + Jan 2011 + Feb 2011 + Nov 2011 + Dec 2011 = 2100 + 1950 + 1740 + 1740 + 1740 + 2100 + 1950 + 2200 + 2000 + 2400 + 2350 = 22200 *P(A) = 11/24 1731.25 = Mac 2010 + June 2010 + July 2010 + August 2010 + Sept 2010 + Mac 2011 + April 2011 + May 2011 + June 2011 + July 2011 + August 2011 + Sept 2011 + Oct 2011 = 1730 + 1300 + 1300 + 1400 + 1450 + 1600 + 1700 + 1500 + 1350 + 1350 + 1500 + 1550 + 1600 = 19330 *P(B) = 13/24 Step 3: State 1: P(A U B ) = P(A) + P(B) P(AB) = P(A) + P(B) P(A)P(B) = 11/24 + 13/24 - (11/24 x 13/24) = 1 0.25 = 0.75 State 2: P(B/A) = P(B A)/P(A) = (13/24 x 11/24)/(11/24) = 0.54 7. Conclusion Forecasting is indeed an inportant element for an organization as well as a firm to maintain nand Appendix

predict their production accurately. Many methods can be applied to conduct forecasting but in our research we emphasize the use of Markov Chain method using Risk Simulator. Several tests were conducted to enable us to get the desired result. Therefore, it is stressed that forecasting indeed is required in each firms to manage their financial as well as their inventory to reduce the overall production cost.

8. References 1. www.sciencedirect.com 2. O.Blaskowtiz, H.Herwartz/ International Journal of Forecasting 27(2011) 10581065. www. Realoptionsvaluation.com Business Forecasting(9th edition) by John E. Hanke and Dean W. Wichern published by Pearson Internationa

3. 4.

Collecting data from the firm representative

With the firms representative

Methods used to interprate production data

Product