DEMAND FORECASTING OF TATA NANO

INTRODUCTION

The Tata Nano is an inexpensive, rear engine , four-passenger city car built by the Indian company Tata Motors and is aimed primarily at the Indian domestic market. Tata Motors began selling its "one-lakh car" in March, 2009. This nickname is due to the Nano's price point, near 100,000 ( US$ 2100). It is the cheapest road car in the world today, though the price continues to rise due to increasing material costs. In 2008 the Financial Times reported: "If ever there were a symbol of Indias ambitions to become a modern nation, it would surely be the Nano, the tiny car with the even tinier price-tag. A triumph of homegrown engineering, the Nano encapsulates the dream of millions of Indians groping for a shot at urban prosperity." "Homegrown engineering" is a relative term here as much of the systems and parts used in the Nano may not have been developed or produced in India. The Tata Nano has become somewhat symbolic as a modern 'people's car', often being compared to the likes of the Ford Model T and the original Volkswagen Beetle. The Nano has also become a status symbol in its home market of India, where it provides an opportunity for new car ownership for people who would otherwise never own one, and for the wealthy to join the trend.

CONTD...
Seeing an opportunity in the great number of Indian families with two-wheeled rather than four-wheeled vehicles Tata Motors began development of an affordable car in 2003. The purchase price of this no frills auto was brought down by dispensing with most nonessential features, reducing the amount of steel used in its construction, and relying on low-cost Indian labor. The introduction of the Nano received much media attention due to its low price and the car was available to buy throughout India in early 2011 The Nano's development was foreshadowed by the 2005 success of the affordable, 4-wheeled Tata Ace truck.

Technical specifications

The Nano (2012) is a 38 PS (28 kW; 37 hp) car with a two-cylinder 624 cc rear engine. The car complies with BS4 Indian emission standards and can also meet European emission standards as well. Engine: 2 cylinder petrol with Bosch multi-point fuel injection (single injector) all aluminium 38 metric horsepower (28 kW) 624 cc (38 cu in) Value Motronic engine management platform from Bosch 2 valves per cylinder overhead camshaft Compression ratio: 9.5:1 bore stroke: 73.5 mm (2.9 in) 73.5 mm (2.9 in) Power: 38 PS (28 kW; 37 bhp) @ 5500 +/-500rpm Torque: 51 N m (38 ft lbf) @ 3000 +/-500 rpm Layout and Transmission Rear wheel drive 4-speed manual transmission Steering mechanical rack and pinion w/o servo

Turning radius: 4 metres Performance Acceleration: 0-60 km/h (37 mph): 8 seconds Maximum speed: 105 km/h (65 mph) Fuel efficiency (overall): 25.2 kilometres per litre (4.24 litres per 100 kilometres (66.6 mpg-imp; 55.5 mpg-US)) Body and dimensions Seat belt: 4 Trunk capacity: 150 L (5.3 cu ft) Suspension, Tires & Brakes Front brake: 180 mm drum Rear brake: 180 mm drum Front track: 1,325 mm (52.2 in) Rear track: 1,315 mm (51.8 in) Ground clearance: 180 mm (7.1 in) 12-inch wheels

Demand Forecasting :A demand forecast is the prediction of what will happen to your company's existing product sales. It would be best to determine the demand forecast using a multi-functional approach. The inputs from sales and marketing, finance, and production should be considered. The final demand forecast is the consensus of all participating managers. You may also want to put up a Sales and Operations Planning group composed of representatives from the different departments that will be tasked to prepare the demand forecast.

How is demand forecast determined? There are two approaches to determine demand forecast (1) the qualitative approach, (2) the quantitative approach. The comparison of these two approaches is shown below:

Description Qualitative Approach Quantitative Approach Applicability Used when situation is vague & little data exist (e.g., new products and technologies) Used when situation is stable & historical data exist (e.g. existing products, current technology) Considerations Involves intuition and experience Involves mathematical techniques Techniques Jury of executive opinion Sales force composite Delphi method Consumer market survey Time series models Causal models

Qualitative Forecasting Methods:1. Jury of executive opinion :- The opinions of a small group of high-level managers are pooled and together they estimate demand. The group uses their managerial experience, and in some cases, combines the results of statistical models. 2. Delphi method:- A panel of experts is identified where an expert could be a decision maker, an ordinary employee, or an industry expert. Each of them will be asked individually for their estimate of the demand. An iterative process is conducted until the experts have reached a consensus. 3. Consumer market survey:- The customers are asked about their purchasing plans and their projected buying behavior. A large number of respondents is needed here to be able to generalize certain results. Quantitative Forecasting Methods:- There are two forecasting models here 1. Time Series Forecasting Method:- A time series is a s et of evenly spaced numerical data and is o btained by observing responses at regular time periods. In the time series model , the forecast is based only on past values and assumes that factors that influence the past, the present and the future sales of your products will continue. 2. causal model uses a mathematical technique known as the regression analysis that relates a dependent variable (for example, demand) to an independent variable (for example, price, advertisement, etc.) in the form of a linear equation.

Sales figure of Tata nano:-

Months

Sales 2010

Sales 2011

January 4001 February 4105 March 4710 April 3525 May 7075 June 7704 July 9000 August 8130 1202 3548 5452 6515 10012 8707 8262 6703

September

5520 October November December 3065 509

2936 3865 6401

5784

7466

QUARTERLY ANALYSIS OF SALES FIGURES :Q1 Q2 Q3 Q4

Year 2010

12816

18304

22650

9358

Year 2011

23672

21979

7686

17732

AUTO CORRELATION OF TATA NANO SALE:1st order 2nd order 3rd order 4th order 5th order 6th order 7th order 8th order

0.632

0.156

-0.383

-0.736

-0.761

-0.416

0.135

0.497

9th order

10th order

11th order

12th order

13th order

14thorder

15th order

0.743

0.552

0.156

-0.465

-0.465

-0.465

-0.437

EXPONENTIAL SMOOTHING METHOD

forecasted sales( =0.5) MAPE MAD( =0.5) |Da-Df|
Da-Df/Da*100

actual sales

january february march april may june july august september october november december

4001 4105 4710 3525 7075 7704 9000 8130 5520 3065 509 5784

4001.00 4053.00 4381.50 3953.25 5514.13 6609.06 7804.53 7967.27 6743.63 4904.32 2706.66 4245.33

0.00 52.00 328.50 -428.25 1560.88 1094.94 1195.47 162.73 -1223.63 -1839.32 -2197.66 1538.67

0.00 52.00 328.50 428.25 1560.88 1094.94 1195.47 162.73 1223.63 1839.32 2197.66 1538.67

0.0 1.3 7.0 12.1 22.1 14.2 13.3 2.0 22.2 60.0 431.8 26.6

january february march april may june july august septemb er

october novemb er decembe r

6703 8262 8707 10012 6515 5452 3548 1202

5474.16 6868.08 7787.54 8899.77 7707.39 6579.69 5063.85 3132.92 303 4.46
3865 6401 7466

1228.84 1393.92 919.46 1112.23 -1192.39 -1127.69 -1515.85 -1930.92 98.4 6

415.27 1475.63 1270.32

1228.84 1393.92 919.46 1112.23 1192.39 1127.69 1515.85 1930.92 98.4 6

415.27 1475.63 1270.32

18.3 16.9 10.6 11.1 18.3 20.7 42.7 160.6

2936

3.4
10.7 23.1 17.0

3449.73 4925.37 6195.68

25303.0 MAD(.5) 1054.29231

965.9 MAPE(.5) 40.245021

actual sales

forecasted sales( =0.75)

MAD | Da-Df |

MAPE

January February March April May June July August september October november december

4001 4105 4710 3525 7075 7704 9000 8130 5520 3065 509 5784

4001.00 4079.00 4552.25 3781.81 6251.70 7340.93 8585.23 8243.81 6200.95 3848.99 1344.00 4674.00

0.00 26.00 157.75 -256.81 823.30 363.07 414.77 -113.81 -680.95 -783.99 -835.00 1110.00

0.00 26.00 157.75 256.81 823.30 363.07 414.77 113.81 680.95 783.99 835.00 1110.00

0.0 0.6 3.3 7.3 11.6 4.7 4.6 1.4 12.3 25.6 164.0 19.2

actual sales

forecasted sales( =0.75)

MAD | Da-Df |

MAPE

January February March April May June July August september October november december

4001 4105 4710 3525 7075 7704 9000 8130 5520 3065 509 5784

4001.00 4079.00 4552.25 3781.81 6251.70 7340.93 8585.23 8243.81 6200.95 3848.99 1344.00 4674.00

0.00 26.00 157.75 -256.81 823.30 363.07 414.77 -113.81 -680.95 -783.99 -835.00 1110.00

0.00 26.00 157.75 256.81 823.30 363.07 414.77 113.81 680.95 783.99 835.00 1110.00

0.0 0.6 3.3 7.3 11.6 4.7 4.6 1.4 12.3 25.6 164.0 19.2

January

6703 8262 8707 10012 6515 5452 3548 1202 2936 3865 6401 7466

6195.75 7745.44 8466.61 9625.65 7292.66 5912.17 4139.04 1936.26 2686.07 3570.27 5693.32 7022.83

507.25 516.56 240.39 386.35 -777.66 -460.17 -591.04 -734.26 249.93 294.73 707.68 443.17

507.25 516.56 240.39 386.35 777.66 460.17 591.04 734.26 249.93 294.73 707.68 443.17

7.6 6.3 2.8 3.9 11.9 8.4 16.7 61.1 8.5 7.6 11.1 5.9

February March April May June July August september October november december

11474.7 MAD(.75) 478.11051

406.5 MAPE(.75) 16.93624

COMPRESSION OF ERROR:MAD MAPE

=0.75 478.11051 16.93624

1054.29231 =0.50

40.245021

= 0.75 so the expected sales of next month that is January 2012 is 7023(approx). Suppose, if all the factor remain constant in the year the expected demand for the year 2012 would be equal to 84276.

Since the MAD and MAPE are less when

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