Manager Presentation

Gaurav More, Meredith Nelson, Abel Perumbully, Ghurucharan Ramachandran

1
 Target Market Segments
Target Market:
Middle to Low Socioeconomic Groups

Customer Needs:
Affordable products that meet daily needs

Walmart Competitive Strategy:

Provide the lowest prices

http://evolvedigitalagency.com/defining-target-market-101/
To achieve strategic fit, supply chain
needs to increase supply chain surplus
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 Supply Chain Surplus = Value of final product to the customer -

Three Decisions Impacting Surplus

1. Supply Chain Strategy & Design

2. Supply Chain Planning

3. Supply Chain Operations

Making good decisions

start with an accurate forecast.
https://www.linkedin.com/pulse/any-difference-between-supply-chain-surplus-profit-sumit-
soni

3
 Potential Factors Affecting Sales

Inventory changes
Credit policy Seasonality Population
CPI
change
Marketing

Internal factors External factors

Capacity Distribution Weather Fuel

Price change method Competition Price

4
Testing the Sales Factors
Inferences from Regression Analysis:
● Store, Date, Fuel_Price, CPI, Unemployment, MarkDowns 1, 3
and 5 - most significant
● MarkDowns 2 and 4 - significant

Factors that seemed important initially:

Temperature, IsHoliday

Reasons of wrong initial assumptions:

Temperature: The Data available is for weekly sales so the temperature

of one single day of that particular week will not affect the demand for
other days

IsHoliday: There were only 10 holidays in the data available in “train”

file.

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 Types of Forecasting
Qualitative
● Market survey
● Executive opinion
● Sales analysis

Quantitative
● Naive
● Winter’s Model
● ARIMA

Short term and long term forecast

https://www.lynda.com/Business-Skills-tutorials/Sales-Forecasting/548711-
2.html

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 Forecasting

Sampling Analysis of Evaluation of

Best Model Forecast
Departments Data Outcome

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 How Forecasting Adds Value to the Company
Accurate Forecasting Increases
Supply Chain Surplus by Informing
Supply Chain Decisions Regarding:

1. Uncertainty in sales
2. Aggregate planning
3. Peaks in demand like Christmas
4. Reducing stock out rates
5. Balancing between responsiveness and
efficiency
6. Drivers of Supply Chain Performance:
Facilities, inventory, transportation,
information, sourcing and pricing
http://trinamix.com/event/solution-area-supply-chain-planning/

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 Technical Presentation

Gaurav More, Meredith Nelson, Abel Perumbully, Ghurucharan Ramachandran

9
 Dataset
● The datasets were obtained from kaggle
● Combined features.csv with train.csv to obtain a combined dataframe
● NA values were replaced with zeros for markdown and median for CPI and
Unemployment rates
● The features were deemed to be not that significant for the forecast as the
regression analysis on this processed dataset failed with a very low R-sq
value.

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 Forecast for Holt Winters Model
The train set was split to validate the HW model and a forecast for the next 36
weeks were done. The MAPE value was 1.99%

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 Forecast for ARIMA Model

● An auto.arima model
was run and a the
following forecast was
obtained with an MAPE
of 1.70%
● The seasonal
component order of
(0,1,0) with moving
average component
(1,1,1) gets the best fit
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 Department Level Comparison
● Departments were chosen because they
contain similar product families which
are needed for aggregate planning
Dept
11 ● If one supply chain served these 45
stores, they would be planning by
81 product families

Departments Dept
23 ● Once the three departments were
in Population randomly chosen, all sales data was
pooled from across the 45 stores by
week (143 weeks total) for each
Dept
44 department

● These 3 data sets were used to test the

accuracy of our forecast models 13
 Nature of Data Sets at Department Level
Trend Present Seasonality Present
Departments

Based on trend and seasonality being present, Winters Model & ARIMA Models were Chosen:
Naive Model will be used to benchmark performance 14
Naive Approach
MAPE Average
Dept 11:
Key Takeaways
10.8444
1. No response to trends &
seasonality

2. Errors increase with

MAPE Average fluctuations in data
Dept 23:
18.767
3. Tracking signal
increases overtime

*MAPE = Mean Average Percent Error

MAPE Average
Dept 44:
13.275

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Winters Model

MAPE Average Key Takeaways

Dept 11:
9.612 1. Responds to Trends
2. MAPE < Naive MAPE
3. Tracking signal
increases overtime
MAPE Average
Dept 23: ● Need additional data to
14.332 improve error measures
● Not an ideal model
● Performs better than
benchmark
MAPE Average
Dept 44:
9.035

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 ARIMA

MAPE Average Key Takeaways:

Dept 11:
5.457% ● For department
projections the ARIMA
model gives the best
MAPE Average MAPE values
Dept 23: ● But the graphs show
10.61% that the forecasting for
department 23 is
showing significant
MAPE Average errors
Dept 44:
8.601%

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Conclusion
● By comparing the MAPE and forecasting values of the three models we can say the ARIMA model
suits well and gives the best forecast with the lowest MAPE measure
● The HOLT WINTERS model also has promising results and responds to seasonality
● At the departmental level, the HW model is more consistent as compared to the ARIMA model
● For the departmental level forecast to be more accurate, additional data mentioning what products a
department sells can be used on an ARIMAX model

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