TERM- PAPER

Lost Sales Forecast

Table of Contents

Introduction 3
Carlson Department Store Sales data for September 1992 through August 1996 4
Countywide Department Stores Sales data for September 1992 through August 1996 5
Choosing the appropriate forecasting method 6
Trend and Seasonal Components in Forecasting 7
An estimate of lost sales for the Carlson Department Store 10
Conclusion 10

Introduction

The Carlson Department Store suffered heavy damage when a hurricane struck on August 31, 1996. The store was closed for four months (September 1996 through December 1996) causing our sales drop to $0. The task of this report is to analyze sales in …show more content…
Choosing the appropriate forecasting method

There are many different forecasting methods. One of the challenges we had to face was to choose the right technique. Smoothing methods are appropriate for a stable time series. When a time series consist of random fluctuations around a long-term trend line, a linear equation may be used to estimate the trend. When seasonal effects are present, seasonal indexes can be computed and used to deseasonalize the data and to develop forecasts. When both seasonal and long-term trend effects are present, which is also the case of Carlson Department Store as well as the case of all department stores in the county, a trend line is fitted to the deseasonalized data; the seasonal indexes are then used to adjust the trend projections.

Trend and Seasonal Components in Forecasting

The procedure of forecasting the sales for months September through December 1996 (had there been no hurricane) for The Carlson Department Store is summarized in Table 3.

Table 3: Procedure of forecasting sales for Sep.-Dec. 1996
| | |Sales |12-month |Centered |Seasonal |Deseasonalized |
| | | |Moving |Moving |Irregular |Sales |
| | | |Average |Average |Value | |
|1992 |Sept. |1.71 |- |- |-