Contents

Part 1 2

Part 2 6

Part 3 8

Conclusions 9

Part 1

1.1 What do you understand by time series forecasting? Give an example. You should not use the examples given in the PPT slides/hand-outs. You should also indicate at least two sources very clearly.

Time series forecasting is a forecast technique used to calculate the possible values (profits) of a product using the past quantitative data sales and the average.

In essence, time series constitutes quantitative data models, its goal is to be able to calculate and predict the future or recent values of a variable by using only historical data on that one variable. A variable can be anything with a liability to change or vary such as stock prices, interest rates or any other number. As a sequence of recorded observations over time, time series data can be observed at many frequencies, meaning annual (once a year) quarterly (four times a year), monthly or weekly. Presented in chronological order – they again help us forecast our values.

Examples:

Koop, G (2006) ‘Analysis of Financial Data’, (online). Wiley. Available at: http://www.myilibrary.com?ID=36214 (Accessed 2 19 April 2015)

Mentzer, J. and Moon, M. (2005) ‘Sales forecasting management: A demand management approach’, 2nd edn. SAGE Publications, pp. 73-112.

RENDER, B., STAIR, R. M., HANNA, M. E., & HALE, T. S. (2015). ‘Quantitative analysis for management’, p169.

1.2 Draw an appropriate graph that displays Years in Quarters against Profit (£000) for the period (2009Q1-2014Q4) given in the file “clothes.xlsx”.

1.3 Telco would like to forecast its future profit before making the decision to expand. To support the decision process, you are required to show: a. the forecasted quarterly profit for the 2015Q1 to 2015Q4 using a multiplicative method, b. the total forecasted profit for 2015 and c. a graph that displays the original and forecasted profit (2009Q1 to 2015Q4).

a.

The 2009Q1 to 2015Q4 forecast follows the same flow with a steady increase in sales during winter.

b.

Quarter Quarter Number Trend Prediction Seasonal Variation Forecast

1 25 173.0475 1.041127485 180.16

2 26 175.911 0.807761248 142.09

3 27 178.7745 0.989600464 176.92

4 28 181.638 1.169707132 212.46

Total 711.64

The total profit amounts to £711k.

c.

1.4 Show the formulae you used in Excel.

This is the formula used to forecast the profit for Year 2015.

1.5 Write a report of no more than 500 words. Your report must include seasonal movements of quarterly profit, expected quarterly average profit, annual profit and the forecasted quarterly profit for 2015.

Since the start of 2009 until the end of 2014, profits have been on an increase. The company has been doing well with keeping the profits increasing. The quality of the company’s products has really shone through. Sales have been increasing and from the forecast it is safe to assume that the same pattern will continue. From the graph, we know that most sales happen during the winter, being a winter shop that only proves to be a good sign. What is even more positive is the fact the average profits have been steadily increasing…

2015 Moving Average Profit

Q1 177.50

Q2 176.67

Q3 194.00

Q4 212.00

The maximum amount of profit looks to be 212 and the lowest profit 176.67 the profit for 2009 to 2014 correlates with that concept so everything looks fine.t so we know for sure the average profit will increase once again with a boost in sales during winter again. It is expected that the total amount of profit for the year to be about £711k. It looks like boost in profits will be made once again.

The forecasted quarterly profit shows the same fall and also the same seasonal forecast with meaning more sales during winter and fall during summer. Looking at the trend line we know the general progress indicates us to a steady increase in average profits.

Finally, the overall graph illustrates that ongoing progress.

PART 2

2.1 Calculate the expected profit for all possible outcomes.

Big expansion calculated in thousands.

Big expansion

High Demand 2000 0.25 500

Medium Demand 1500 0.35 525

Low Demand 550 0.40 220

Expected Revenue 1245

Expected Revenue 1245

Cost 300

Total 945

Small expansion calculated in thousands.

Small Expansion

High Demand 1500 0.25 375

Medium Demand 1000 0.35 350

Low Demand 500 0.4 200

Expected Revenue 925

Expected Revenue 925 925

Cost 100 100

Total 825 825

No expansion calculated in thousands.

No expansion

Expected Revenue 716

Cost 0

Total 716

2.2 Draw a decision tree for all possible outcomes.

2.3 Advice the business (write a brief memo of no more than 200 words). The memo should be addressed to Silvia Laurence.

Silvia as the series forecast suggests, all possibilities within an expansion will bring profit to what looks like a good 2015. The suggested small expansion looks to bring a total net profit of £825k and the big expansion the net profit of £945k. A big expansion sounds like the most deal. It all looks like the right time and opportunity for a big expansion but the problem is the margin between the two expansions does not look too far apart. With the total cost £300k cutting costs or convincing investors to provide funds to expand the business which such small profit margin will not sound too appealing. On the other hand looking at the cost of a small expansion, we notice a loss of only £100k and with a total net profit around £825k including the £100k (don’t use we!) do not get to spend in costs the total net profit amounts to that of £925k almost equal to that of a bigger expansion. It does not take much to see that the indefinite option right now should be small.

Part 3

1. Draw and complete the critical path analysis for Telco’s new project. Clearly state the ES, EF, LS, LF, the critical path and total duration of the project

The total Duration is 30 weeks.

2. Write a memo of no more than 300 words – addressed to Silvia Laurence. Your report should include: a. The critical activities on the critical path and explain what they represent. b. The activities that can be delayed in the context of the Telco’s new project. c. As part of your conclusion – explain the usefulness of critical path analysis.

a.

Eight activities have been identified in order to reach the goal of the project; each represents an activity, which should be followed by the next one. The critical path ranges from A to H (illustrated by the red line). All activities have their own duration time with the longest ones being A (10 weeks) and D (12 weeks). The critical path should equal the earliest with the latest finish time with the elapsed time of this project that looks to be 30 weeks.

b.

The way to identify an activity with a chance of delay is looking at the earliest and the latest finish time of a critical activity, by subtracting the two it is possible to calculate the amount of time a critical activity could be delayed. In regards, Telco’s new expansion plan they are three critical activities that fill the criteria for the opportunity of delay: C for 2 weeks, D for 1 week and last G for a total of 4 weeks.

c.

The critical path not only helps us analyse the project but also takes our objectives and sorts them in the right order with a careful led structured plan. That ensures the line of work shall pass without any problems as it informs for any sort of delays if there is any need to make one and overall accelerates the need of through thinking and extensive organizing.

Conclusion

A time series forecast was used to determine the profits for a possible expansion. The forecast showed Telco’s steady boost in sales – specifically during winter, such positive results only welcomed an expansion. An assessment made, swerved towards a smaller expansion as the best option of the company, with the use of a critical path it is known that the expansion project is calculated to take 30 weeks.

First they were bigger sales this year and second a small expansion is recommended so we the critical path if useful to calculate that with the project assigned to different critical activities and an assigned critical path

The expansion looks to be take 30 weeks