DEMAND FORECASTING OF CLOSE-UP

Submitted to: RUPALI MISHRA NIGAM FACULTY

By:Abdul Fazal Khan MBA 1st SEM

Contents
1: Acknowledgement 2:- About CLOSE-Up 3:- From our range 4:- Demand forecast 5:- Methods of forecasting
6:- Bibliography

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ACKNOWLEDGEMENT We are very Thankful to our Project guide Ms. RUPALI MISHRA NIGAM faculty member (lecturer), ABS (Asian Business School) for his valuable guidance, deep-rooted interest, inspiration and continuous encouragement throughout the period of project.

Abdul Fazal Khan MBA 1st SEM

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About CLOSE-Up
Close Up is the original youth oral care brand of Unilever Arabia and Middle East. It is one of the first brands targeting youth in the oral care market globally, with an edgy and youthful image which stays relevant till date.

A unique oral care brand for up-close situations

Unlike the typical opaque, mint-flavored toothpaste of the time, Close Up debuted in 1967 as a clear red gel with a spicy cinnamon taste and mouthwash right in the toothpaste. A unique brand identity was developed, with Close-Up positioned as the toothpaste that gives people confidence in those very "up close and personal" situations.

Couples with bright smiles in very "close" situations were featured on the packaging, and commercials depicted youthful adults blowing kisses at each other.

The idea of toothpaste that could give them fresh breath, white teeth and, subsequently, a little extra self-confidence and sex appeal provided instant appeal to consumers. Over the years, Close-Up briefly flirted with a few variations, from a green mint-flavored version to a trendy clear gel.
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In 2006, Close-up Limited Edition launch in Arabia redefined the toothpaste market with its unique new flavors: Choco-loko, Tangerine Burst, and Lychee. It brought excitement and life into the rather boring toothpaste category and helped the brand achieve record sales and shares. One thing remains constant: Close-up is still symbolized by attractive white smiles in very close situations.

Key facts

First toothpaste in US to combine mouthwash and toothpaste in one formula

First gel toothpaste in the world The Fluoride in Close Up called monofluorophospate, makes the entire tooth structure more resistant to delay. It also strengthens teeth, which aids in repairing early delay before the damage can even be seen.

Close-Up is the number 2 brand in the GCC

From our range

Crystal

Eros Red

Green Core

Green Explorer

Jares

Lemon Mint

Menthol Chill

Orange Explorer

Red Hot

Snowman Green

Yellow Core

What is a demand forecast?

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. Determination of the demand forecasts is done through the following steps: Determine the use of the forecast Select the items to be forecast Determine the time horizon of the forecast Select the forecasting model(s) Gather the data Make the forecast

 Validate and implement results The time horizon of the forecast is classified as follows:

Description Short-range Duration Medium-range Usually less than 3 months, maximum of 1 year Applicability Job scheduling,

Forecast Horizon Long-range 3 months to 3 years More than 3 years

Sales and

New product development,

worker assignments production

planning, budgeting facilities planning

Methods of forecasting
Simple Survey Method:
For forecasting the demand for existing product, such survey methods are often employed. In this set of methods, we may undertake the following exercise. 1) Experts Opinion Poll: In this method, the experts on the particular product whose demand is under study are requested to give their opinion or feel about the product. These experts, dealing in the same or similar product, are able to predict the likely sales of a given product in future periods under different conditions based on their experience. If the number of such experts is large and their experience-based reactions are different, then an average-simple or weighted is found to lead to unique forecasts. Sometimes this method is also called the hunch method but it replaces analysis by opinions and it can thus turn out to be highly subjective in nature. 2) Reasoned Opinion-Delphi Technique: This is a variant of the opinion poll method. Here is an attempt to arrive at a consensus in an uncertain area by questioning a group of experts repeatedly until the responses

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appear to converge along a single line. The participants are supplied with responses to previous questions (including seasonings from others in the group by a coordinator or a leader or operator of some sort). Such feedback may result in an expert revising his earlier opinion. This may lead to a narrowing down of the divergent views (of the experts) expressed earlier. The Delphi Techniques, followed by the Greeks earlier, thus generates reasoned opinion in place of unstructured opinion; but this is still a poor proxy for market behavior of economic variables. 3) Consumers Survey- Complete Enumeration Method: Under this, the forecaster undertakes a complete survey of all consumers whose demand he intends to forecast, Once this information is collected, the sales forecasts are obtained by simply adding the probable demands of all consumers. The principle merit of this method is that the forecaster does not introduce any bias or value judgment of his own. He simply records the data and aggregates. But it is a very tedious and cumbersome process; it is not feasible where a large number of consumers are involved. Moreover if the data are wrongly recorded, this method will be totally useless.

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4) Consumer Survey-Sample Survey Method: Under this method, the forecaster selects a few consuming units out of the relevant population and then collects data on their probable demands for the product during the forecast period. The total demand of sample units is finally blown up to generate the total demand forecast. Compared to the former survey, this method is less tedious and less costly, and subject to less data error; but the choice of sample is very critical. If the sample is properly chosen, then it will yield dependable results; otherwise there may be sampling error. The sampling error can decrease with every increase in sample size 5) End-user Method of Consumers Survey: Under this method, the sales of a product are projected through a survey of its end-users. A product is used for final consumption or as an intermediate product in the production of other goods in the domestic market, or it may be exported as well as imported. The demands for final consumption and exports net of imports are estimated through some other forecasting method, and its demand for intermediate use is estimated through a survey of its user industries.

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Complex Statistical Methods: We shall now move from simple to complex set of methods of demand forecasting. Such methods are taken usually from statistics. As such, you may be quite familiar with some the statistical tools and techniques, as a part of quantitative methods for business decisions. (1) Time series analysis or trend method: Under this method, the time series data on the under forecast are used to fit a trend line or curve either graphically or through statistical method of Least Squares. The trend line is worked out by fitting a trend equation to time series data with the aid of an estimation method. The trend equation could take either a linear or any kind of non-linear form. The trend method outlined above often yields a dependable forecast. The advantage in this method is that it does not require the formal knowledge of economic theory and the market; it only needs the time series data. The only limitation in this method is that it assumes that the past is repeated in future. Also, it is an appropriate method for long-run forecasts, but inappropriate for short-run forecasts. Sometimes the time series analysis may not reveal a significant trend of any kind. In that case, the moving average method or exponentially weighted moving average method is used to smoothen the series.
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(2) Barometric Techniques or Lead-Lag indicators method: This consists in discovering a set of series of some variables which exhibit a close association in their movement over a period or time. For example, it shows the movement of agricultural income (AY series) and the sale of tractors (ST series). The movement of AY is similar to that of ST, but the movement in ST takes place after a years time lag compared to the movement in AY. Thus if one knows the direction of the movement in agriculture income (AY), one can predict the direction of movement of tractors sale (ST) for the next year. Thus agricultural income (AY) may be used as a barometer (a leading indicator) to help the short-term forecast for the sale of tractors. Generally, this barometric method has been used in some of the developed countries for predicting business cycles situation. For this purpose, some countries construct what are known as diffusion indices by combining the movement of a number of leading series in the economy so that turning points in business activity could be discovered well in advance. Some of the limitations of this method may be noted however. The leading indicator method does not tell you anything about the magnitude of the change that can be expected in the lagging series, but only the direction of change. Also, the lead period itself may change
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overtime. Through our estimation we may find out the best-fitted lag period on the past data, but the same may not be true for the future. Finally, it may not be always possible to find out the leading, lagging or coincident indicators of the variable for which a demand forecast is being attempted. 3) Correlation and Regression: These involve the use of econometric methods to determine the nature and degree of association between/among a set of variables. Econometrics, you may recall, is the use of economic theory, statistical analysis and mathematical functions to determine the relationship between a dependent variable (say, sales) and one or more independent variables (like price, income, advertisement etc.). The relationship may be expressed in the form of a demand function, as we have seen earlier. Such relationships, based on past data can be used for forecasting. The analysis can be carried with varying degrees of complexity. Here we shall not get into the methods of finding out correlation coefficient or regression equation; you must have covered those statistical techniques as a part of quantitative methods. Similarly, we shall not go into the question of economic theory. We shall concentrate simply on the use of these econometric techniques in forecasting.
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We are on the realm of multiple regressions and multiple correlations. The form of the equation may be: DX = a + b1 A + b2PX + b3Py You know that the regression coefficients b1, b2, b3 and b4 are the components of relevant elasticity of demand. For example, b1 is a component of price elasticity of demand. The reflect the direction as well as proportion of change in demand for x as a result of a change in any of its explanatory variables. For example, b2< 0 suggest that DX and PX are inversely related; b4 > 0 suggest that x and y are substitutes; b3 > 0 suggest that x is a normal commodity with commodity with positive income-effect. Given the estimated value of and bi, you may forecast the expected sales (DX), if you know the future values of explanatory variables like own price (PX), related price (Py), income (B) and advertisement (A). Lastly, you may also recall that the statistics R2 (Co-efficient of determination) gives the measure of goodness of fit. The closer it is to unity, the better is the fit, and that way you get a more reliable forecast. The principle advantage of this method is that it is prescriptive as well descriptive. That is, besides generating demand forecast, it explains why
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the demand is what it is. In other words, this technique has got both explanatory and predictive value. The regression method is neither mechanistic like the trend method nor subjective like the opinion poll method. In this method of forecasting, you may use not only time-series data but also cross section data. The only precaution you need to take is that data analysis should be based on the logic of economic theory. (4) Simultaneous Equations Method: Here is a very sophisticated method of forecasting. It is also known as the complete system approach or econometric model building. In your earlier units, we have made reference to such econometric models. Presently we do not intend to get into the details of this method because it is a subject by itself. Moreover, this method is normally used in macro-level forecasting for the economy as a whole; in this course, our focus is limited to micro elements only. Of course, you, as corporate managers, should know the basic elements in such an approach. The method is indeed very complicated. However, in the days of computer, when package programmes are available, this method can be used easily to derive meaningful forecasts. The principle advantage in this method is that the forecaster needs to estimate the future values of only the exogenous variables unlike the regression method where he has
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to predict the future values of all, endogenous and exogenous variables affecting the variable under forecast. The values of exogenous variables are easier to predict than those of the endogenous variables. However, such econometric models have limitations, similar to that of regression method 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 Applicability

Qualitative Approach Used when situation is vague & little data exist (e.g., new products and technologies)

Quantitative Approach 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 Time series models

Sales force composite

Causal models

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Delphi method

Consumer market survey

Qualitative Forecasting Methods Your company may wish to try any of the qualitative forecasting methods below if you do not have historical data on your products' sales .

Qualitative Method Jury of executive opinion

Description 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.

Sales force composite

Each salesperson (for example for a territorial coverage) is asked to project their sales. Since the salesperson is the one closest to the marketplace, he has the capacity to know what the customer wants. These projections are then combined at the municipal, provincial and regional levels.

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

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until the experts have reached a consensus. 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) the time series model and (2) the causal model. A time series is a s et of evenly spaced numerical data and is obtained 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. On the other hand, t he 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. The time series forecasting methods are described below:

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Description

Time Series Forecasting Method

Nave Approach Assumes that demand in the next period is the same as demand in most recent period; demand pattern may not always be that stable

For example:

If July sales were 50, then Augusts sales will also be 50

Description

Time Series Forecasting Method Moving MA is a series of arithmetic means and is used if little or no

Averages (MA) trend is present in the data; provides an overall impression of data over time

A simple moving average uses average demand for a fixed sequence of periods and is good for stable demand with no

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pronounced behavioral patterns.

Equation:

F 4 = [D 1 + D2 + D3] / 4
F Forecast, D Demand, No. Period

A weighted moving average adjusts the moving average method to reflect fluctuations more closely by assigning weights to the most recent data, meaning, that the older data is usually less important. The weights are based on intuition and lie between 0 and 1 for a total of 1.0

Equation:

WMA 4 = (W) (D3) + (W) (D2) + (W) (D1) WMA Weighted moving average, W Weight, D Demand, No. Period

Exponential Smoothing

The exponential smoothing is an averaging method that reacts more strongly to recent changes in demand by assigning a smoothing constant to the most recent data more strongly; useful if recent changes in data are the results of actual change (e.g., seasonal pattern) instead of just random

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fluctuations

F t + 1 = a D t + (1 - a ) F t

Where

F t + 1 = the forecast for the next period

D t = actual demand in the present period

F t = the previously determined forecast for the present period = a weighting factor referred to as the smoothing constant

Time Series Decomposition

The time series decomposition adjusts the seasonality by multiplying the normal forecast by a seasonal factor

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Bibliography
http://www.unileverme.com/aboutus/introductiontounil ever/

http://www.mouthshut.com/product-reviews/Close-UpBlue-Toothpaste-reviews-925004802 http://www.scribd.com/doc/14816876/Project-onToothpaste-image-profile-analysis-of-leading-brandtoothpastes http://wiki.answers.com/Q/What_method_can_be_used _for_sales_presentation http://www.slideshare.net/bhomaram/techniques-forforecasting-human-resources

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