Demand Forecasting

Nirmal Rayons Limited. Demand Forecasting of Cellophane for Confectionary Industry Methodology: Time Series Analysis Assumptions: 1. Cellophane is assumed to be used for 80% of the organised sector production, balance being paper. 2. Only 5% of the unorganised sector production is expected to be wrapped in cellophane. 3. Industry norms: 40Kg. is required to wrap one tonne of candies. Now here we can use Time series analysis to forecast demand of cellophane for the year 1981. First we have to estimate production for the year 1981. We have data of production from 1972 to 1977. From that it is clear that growth rate for Organized and Unorganized sector production is 6% and 5% respectively. Following table shows estimation for 1981:

Year 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981

Organized Sector production(Tonn es) 16750 17750 18800 19900 21100 22400 23744 25169 26679 28279

Unorganized sector production(Ton nes) 300000 31500 33400 35400 37500 39750 41738 43824 46016 48316

Now we have given PVC share from 1972 to 1977. If plot this we get linear equation y=ax+b having a is slope and b is intercept. Here x is time. We get slope a=0.028 and intercept b= -0.0173

Following table shows estimated PVC share for 1981: Year

Time

PVC Share

1972 1973 1974 1975 1976 1977 1978 1979 1980 1981

1 2 3 4 5 6 7 8 9 10

0% 5% 7% 10% 12% 15% 18% 21% 24% 27%

Now considering assumptions stated above we can calculate Net Cellophane required using following formula: Net Cellophane requirement = (Organised sector production*80% + Unorganised sector production*5%)*(1-PVC share)*40/1000 For the year 1981:Net cellophane requirement= (28279*80%+48316*5%)*(1-27%)*40/1000 =731 tonnes (Ans.) Following table and chart shows cellophane requirement for each year from 1972 to 1981.

Year 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981

Net cellophane requirement(Tonn es) 1136 599 622 637 660 677 691 706 719 731