Chapter 9 Time Series Analysis

Time Series Analysis
Benefits and Uses of Time Series

• Benefits of time series
– Monitor sales performance over time… remove variation in monthly
sales caused by calendar differences and seasonality that can
conceal potential problems with sales
– Accurately determine the direction and rate of growth/decline in sales
– Quickly identify changes in sales trends and correlate them to factors
affecting sales… industry, company, competition
– Improve decision making regarding sales and marketing actions
• Uses of time series

– Assess current sales performance and evaluate the effectiveness of
sales programs
– Determine underlying sales trend and project year end sales
– Establish appropriate budgets for next year and estimate monthly
budget spreads
Time series analysis is the primary sales analysis technique at A-B

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Time Series Analysis
• What is Time Series Analysis?
• How are Time Series plots developed?
• What are the advantages of Time Series Analysis?
• What are Time Series used for?

What is Time Series Analysis ?
• Time series analysis is a statistical technique used to
analyze and monitor sales volume over time.

Why Time Series ?
Beer Sales
250
Thousand Barrels
200
150
100
50
0
1998 1999 2000 2001 2002 2003
• Beer sales are highly seasonal

• It is very difficult to evaluate monthly sales over time.

How do time series work?
• Monthly variation in sales is caused by two major factors
– Seasonality
– Selling Days (calendar effects)
• Time Series technique statistically removes the effects of

these two factors
• Time Series technique uses the X-11 procedure for seasonal

adjustments
– The X-11 procedure was developed by the U.S. Bureau
of Census in the 1950’s. It was brought to A-B in the
early 1960’s and has become the standard for reporting
sales.
How do time series adjust sales ?
• A selling day adjustment factor for each month is
computed and applied to the raw sales
– This factor allows you to compare months as if they
had the same number of selling days … e.g.
accurately compare the June this year vs. June last
year
• A seasonal factor is computed and applied to the selling

day adjusted sales
– This factor, when applied, gives you monthly data
directly comparable to any other month … e.g.
accurately compare June this year with May this year

Selling Days
August 2003 August 2002
S M T W T F S S M T W T F S
1 2 1 2 3
1.0 0.0 1.0 1.0 0.0
3 4 5 6 7 8 9 4 5 6 7 8 9 10
0.0 1.0 1.0 1.0 1.0 1.0 0.0 0.0 1.0 1.0 1.0 1.0 1.0 0.0
10 11 12 13 14 15 16 11 12 13 14 15 16 17
0.0 1.0 1.0 1.0 1.0 1.0 0.0 0.0 1.0 1.0 1.0 1.0 1.0 0.0
17 18 19 20 21 22 23 18 19 20 21 22 23 24
0.0 1.0 1.0 1.0 1.0 1.0 0.0 0.0 1.0 1.0 1.0 1.0 1.0 0.0
24 25 26 27 28 29 30 25 26 27 28 29 30 31
0.0 1.0 1.0 1.0 1.0 1.0 0.0 0.0 1.0 1.0 1.0 1.0 1.0 0.0
31
0.0
Aug-2003 has 21 selling days Aug-2002 has 22 selling days
All other things being equal, sales in Aug-03 would decrease 4.8%
because of one less selling day. In order to compare the two
months Aug-03 sales will have to be adjusted up +4.8%.

Seasonality
• Seasonality is Jan Feb Mar Apr May Jun
No Seasonality 100 100 100 100 100 100
expressed as an index Strong Seasonality 60 75 80 120 140 120
for a month compared Jul Aug Sep Oct Nov Dec
No Seasonality 100 100 100 100 100 100
to an average month. Strong Seasonality 118 80 75 62 120 150
• A month where sales No

were 20% higher than 160
Seasonality
140
average would have a 120
seasonal factor of 120. 100
80
• A month which was 60
10% lower than 40

Strong
average would have a 20 Seasonality
0
seasonal factor of 90. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Adjusting Sales
Raw Sales X Selling Day Factor

Seasonally Adjusted Sales =
÷ Seasonal Factor
Actual Sales Selling Day Seasonal Adjusted

Month
(M bbls) Factor Factor Sales
Jun-03 211 X 1.004 ÷ 1.210 = 175
Jul-03 221 X 0.958 ÷ 1.212 = 175
Aug-03 196 X 1.054 ÷ 1.190 = 174
Sep-03 160 X 1.004 ÷ 0.948 = 169

How do time series work?
Raw Sales
Selling Day Adjusted
Seasonally Adjusted

Dissecting a Time Series Plot
2000 STR’s; Ontario STC’s
1800
Data Description … tells us
Annualized Sales in M bbls
1600 the type of data plotted

1400
1200
Irregular variations … shows us the
1000
impact of market place actions
800
600
Trend Line … tells us the direction of sales
based on past & present performance
400
Annualized Sales … tells us how
200
big the market is.
0
1994 1995 1996 1997 1998 1999

Advantages of Time Series
• Advantages of time series:
– Removes variation in monthly sales caused by calendar
differences and seasonality
– Help us to accurately estimate the direction and rate of
sales growth/decline
– They are an improvement over other methods such as
year-over-year growth or moving averages because they
show us what is happening sooner… an early warning of
changing sales conditions
• Time series significantly improve decision making…
– Allows us to take corrective action sooner
– Allows us to take the right corrective action
– Helps to establish appropriate sales objectives

Advantages of Time Series
• If the time series shows a
relative smooth pattern from 25
one year to the next … the
trend and the year over year 20
growth would provide
15
roughly the same reading.
10
+50%
• But, if there was a significant 5
market event or change, the
0
year over year trends will be
misleading 1998 1999

Misleading Growth Rates
16 16
14 14
12 12
10 10
8 0% 8 +21%
6 6
4 4
Positive Trend: Trend Flat; Positive
2 Flat % Change 2 % Change
0 0
1998 1999 1998 1999

More Misleading Growth Rates
16 25
14
20
12
10 15
8
-21% 10
+15%
6
4
Trend Flat; Negative 5 Trend Negative;
2 % Change Positive % Change
0 0
1998 1999 1998 1999

What are time series used for?
• At A-B we use time series to…
– Assess current sales performance
– Develop current year sales projections…PYE (projected
year-end)
– Forecast next year sales… develop budgets and monthly
spreads
– Other quantitative sales analysis

Assessing Sales Performance
Beer Sales
250
200
Thousand Barrels
150
100
50 How is our YTD performance?
0
1998 1999 2000 2001 2002 2003

Assessing Sales Performance
Beer Sales
2,500
Annualized Sales in US bbls (in 1000's)
2,000
1,500
1,000
500 % Change vs. Year Ago

Budget: 2,160M bbls Sep-03: +4.1% ; SDA -0.9%
PYE: 2,060M bbls YTD Sep-03: +1.2% ; SDA +1.2%
0
1998 1999 2000 2001 2002 2003

Estimating PYE
Beer Sales Underlying Trend
Predicted
2,500
{
2,000
1,500
If there is no change in the business

1,000 environment sales will continue on current
trend. Points off the trend line can be used
to estimate monthly sales.
500
0
1998 1999 2000 2001 2002 2003

Underlying Trend
• Underlying trend is a trend line that best describes the
current sales growth rate.
• It is the collective representation of all underlying factors that
are influencing sales… industry, competition, and company
specific, etc.
• It is determined using a best-fit line to a set of points on the
time series. The points are selected based on in-depth
understanding of the underlying factors influencing sales,
how they have changed over time, and how they will likely
change in the future.
• Points of inflection on the time series often signal changes in
the underlying factors and hence the underlying trend.

Estimating PYE
Beer Sales
2,500 Predicted
{
2,000
1,500 2003 PYE Estimate (M bbls)

Actual Trend (Annualized SDAF Seasonal Month PYE
& Deseasonalized) Estimate
1,000
J
F
M
120
118
138
120
118
138
{ Actual Sales
A 166 166
M 195 195
J 211 211
J 221 221
500 A 196 196
S 160 160
O
N
2,106
2,110
0.959
1.110
0.932
0.914
÷ 12
÷ 12
171
145
171
145
{ Predicted
D 2,113 1.004 1.239 ÷ 12 217 217
2,059
0
1998 1999 2000 2001 2002 2003
Seasonally Adj. Sales ÷ Selling Day Factor

Monthly Sales =
X Seasonal Factor
Establishing Budgets and Spreads
Beer Sales
2,500
2,000
1,500
Given our YTD Sep-2003 performance what
would be an appropriate budget for next year
1,000 and how should that volume be spread by
month?
500
%Change vs. Year Ago
Sep-03: +4.1% ; SDA -0.9%
YTD Sep-03: +1.2% ; SDA +1.2%
0
1998 1999 2000 2001 2002 2003 2004

Establishing Budgets and Spreads
Beer Sales
2,500
2,123
2,000
1,500 2004 Budget (M bbls)

2003 Trend (Annualized SDAF Seasonal Month %SDA
& Deseasonalized) Estimate vs. 2003
J 120 2,117 1.004 0.675 ÷ 12 119 +3.4%
F 118 2,121 1.054 0.754 ÷ 12 126 +6.8%
1,000 M 138 2,124 0.917 0.852 ÷ 12 165 +10.0%
A 166 2,128 1.054 0.995 ÷ 12 167 +0.7%
M 195 2,131 1.054 1.082 ÷ 12 182 -1.9%
J 211 2,135 0.959 1.210 ÷ 12 225 +1.6%
J 221 2,138 1.004 1.214 ÷ 12 215 +1.8%
A 196 2,142 1.004 1.185 ÷ 12 211 +2.4%
500 S 160 2,146 1.004 0.952 ÷ 12 170 +6.2%
O 171 2,149 1.054 0.932 ÷ 12 158 +1.9%
N 145 2,153 1.004 0.914 ÷ 12 163 +2.2%
D 217 2,156 1.004 1.239 ÷ 12 222 +2.0%
2,059 2,123 +3.1%
0
1998 1999 2000 2001 2002 2003 2004

Another Example Using Time Series
Estimating the price elasticity
64.0
57.6 Price = P1
Volume = V1
51.2
Annualized STR's in M
Price = P2
44.8
Volume = V2
38.4
BBLS
32.0
Elasticity Calculation
25.6 P1: 18.99; P2: 20.45 i.e. +7%
V1: 44.5; V2: 38.5 i.e. -14%
19.2 Price Increase
Elasticity = -2.0
12.8
6.4
0.0
1998 1999 2000 2001 2002 2003
Conclusions
• Time Series technique is a very useful sales analysis tool…
it is the standard for reporting and analyzing sales at A-B
• It is a powerful decision making tool for assessing sales
performance, making accurate forecasts, and establishing
appropriate budgets and spreads.

Time Series Thru September
Shipments
% Change vs. Year Ago

4,500
Sep-03: -2.5% ; SDA -7.2%
Annualized Sales Metric Tons in Thousands
YTD Sep-03: +9.0% ; SDA +9.0%

4,000
2003 PYE: 3,290.8M Met. Tons; +10.2% vs. '02
3,552.0
3,500 2004 Forecast: 3,552.0M Met. Tons; +7.9% vs. '03
3,000
2,500
2,000
Trend +8.2%
1,500
1,000
500
% Change: +61.2% +20.9%

0

Time Series Thru October
Shipments

4,500
Oct-03: -6.6% ; SDA -6.6%
YTD Oct-03: +7.9% ; SDA +7.9%

4,000
2003 PYE: 3,215.7M Met. Tons; +7.6% vs. '02
2004 Forecast: 3,471.8M Met. Tons; +8.0% vs. '03
3,471.8
3,500
3,000
2,500
2,000
Trend +6.7%
1,500
1,000
500
% Change: +61.2% +20.9%

0

Qingdao Region
Shipments
900
772.5
800
700
600
500
Trend +3.9%
400 % Change vs. Year Ago
Oct-03: -15.7% ; SDA -15.7%
300 YTD Oct-03: +2.5% ; SDA +2.5%
2003 PYE: 713.5M Met. Tons; +2.0% vs. '02
200
2004 Forecast: 772.5M Met. Tons; +8.3% vs. '03
100
% Change: +1.9% +17.8%

0
1998 1999 2000 2001 2002 2003 2004
South Region
Shipments

800
Oct-03: +6.9% ; SDA +6.9%
YTD Oct-03: +1.9% ; SDA +1.9%

700
2003 PYE: 606.7M Met. Tons; +2.4% vs. '02
630.2
600
500
400 Trend +3.1%
300
200
100
% Change: +102.3% +47.8%

0
1998 1999 2000 2001 2002 2003 2004
North Region
Shipments

900
Oct-03: -5.7% ; SDA -5.7%
YTD Oct-03: +15.2% ; SDA +15.2%

800
2003 PYE: 687.9M Met. Tons; +14.0% vs. '02 741.6
700 2004 Forecast: 741.6M Met. Tons; +7.8% vs. '03
600
500
400
300 Trend +8.8%
200
100
% Change: +174.3% +11.0%

0
1998 1999 2000 2001 2002 2003 2004
Luzhong Region
Shipments

600
Oct-03: +10.1% ; SDA +10.1%
YTD Oct-03: +49.5% ; SDA +49.5% Trend +42.9%
500 2003 PYE: 217.1M Met. Tons; +49.8% vs. '02

400
322.2
300
200
100
% Change: -3.4% -9.2%

0
1998 1999 2000 2001 2002 2003 2004
Huaihai Region
Shipments

300
Oct-03: -28.6% ; SDA -28.6%
YTD Oct-03: -8.8% ; SDA -8.8%
250 2003 PYE: 206.0M Met. Tons; -8.4% vs. '02

210.9
200
150
100
Trend -4.1%
50
% Change: +82.3% +14.6%

0
1998 1999 2000 2001 2002 2003 2004
East Region
Shipments

400
Oct-03: -18.1% ; SDA -18.1%
YTD Oct-03: -7.5% ; SDA -7.5%
350
2003 PYE: 250.7M Met. Tons; -7.5% vs. '02
2004 Forecast: 227.7M Met. Tons; -9.2% vs. '03
300
250 227.7
200
150
100
Trend -9.2%
50
% Change: +74.7% +2.9%

0
1998 1999 2000 2001 2002 2003 2004
Southeast Region
Shipments

300
Oct-03: +7.9% ; SDA +7.9%
YTD Oct-03: +39.8% ; SDA +39.8%
2003 PYE: 184.1M Met. Tons; +41.3% vs. '02

250
2004 Forecast: 221.4M Met. Tons; +20.2% vs. '03 221.4
200
150
100
Trend +35.2%
50
% Change: +56.6%
0
1998 1999 2000 2001 2002 2003 2004
Northeast Region
Shipments

180
Oct-03: +12.9% ; SDA +12.9%
YTD Oct-03: +17.1% ; SDA +17.1% 159.2
160
2003 PYE: 136.3M Met. Tons; +15.6% vs. '02
140 2004 Forecast: 159.2M Met. Tons; +16.7% vs. '03
120
100
80
60 Trend +17.3%
40
20
% Change: +140.7% +29.1%

0
1998 1999 2000 2001 2002 2003 2004
Southwest Region
Shipments

120
Sep-03: +3.7% ; SDA -1.0%
YTD Sep-03: +18.5% ; SDA +18.5%

2003 PYE: 59.8M Met. Tons; +16.8% vs. '02
100
80
70.4
60
40
Trend +12.4%
20
% Change: +41.1%
0
1998 1999 2000 2001 2002 2003 2004

Chapter 9 Time Series Analysis

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Time Series Analysis

Benefits and Uses of Time Series

• Uses of time series

Time series analysis is the primary sales analysis technique at A-B

2022年12月11日 -3- O:/Network/Path/Filename.ppt

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• Beer sales are highly seasonal

2022年12月11日 -5- O:/Network/Path/Filename.ppt

• Time Series technique statistically removes the effects of

• Time Series technique uses the X-11 procedure for seasonal

• A seasonal factor is computed and applied to the selling

2022年12月11日 -7- O:/Network/Path/Filename.ppt

Aug-2003 has 21 selling days Aug-2002 has 22 selling days

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• A month where sales No

seasonal factor of 120. 100

10% lower than 40

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Raw Sales X Selling Day Factor

Actual Sales Selling Day Seasonal Adjusted

Jul-03 221 X 0.958 ÷ 1.212 = 175

Aug-03 196 X 1.054 ÷ 1.190 = 174

Sep-03 160 X 1.004 ÷ 0.948 = 169

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Selling Day Adjusted

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1600 the type of data plotted

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50 How is our YTD performance?

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500 % Change vs. Year Ago

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If there is no change in the business

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1,500 2003 PYE Estimate (M bbls)

Seasonally Adj. Sales ÷ Selling Day Factor

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1,500 2004 Budget (M bbls)

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% Change vs. Year Ago

YTD Sep-03: +9.0% ; SDA +9.0%

% Change: +61.2% +20.9%

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% Change vs. Year Ago

YTD Oct-03: +7.9% ; SDA +7.9%

% Change: +61.2% +20.9%

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% Change: +1.9% +17.8%

% Change vs. Year Ago

YTD Oct-03: +1.9% ; SDA +1.9%

400 Trend +3.1%

% Change: +102.3% +47.8%

% Change vs. Year Ago

YTD Oct-03: +15.2% ; SDA +15.2%

700 2004 Forecast: 741.6M Met. Tons; +7.8% vs. '03

300 Trend +8.8%