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Forecasting

  1. #1
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    Forecasting

    Dear Forum members,

    I am struggeling with forecasting some data. I have attached a small Excel file in which the situation is explained more precisely. I am looking for the forecasted data of 2018. Hope someone can help me!

    Thank you in advance for your help.

    Cordially,

    Bram Nijman
    Attached Files Attached Files

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    Re: Forecasting

    I'm not an expert in sales forecasting. A quick look at your data with my untrained eye reveals no discernible trend or basis for extrapolating.

    Do you know what kind of forecasting algorithm you want to use? Wikipedia lists several types of algorithms: https://en.wikipedia.org/wiki/Forecasting without giving a lot of details about those algorithms. Excel has a few built in algorithms and utilities, including regression algorithms (LINEST() for linear regressions or Solver for non-linear regressions), various FORECAST() functions (that seem based on either straight line linear regression or exponential triple smoothing algorithms), and with enough creativity, one can program most other algorithms into the spreadsheet. I would suggest that the very first step in this sort of forecasting/prediction is choosing a suitable algorithm, which is not something Excel can do for you.
    Quote Originally Posted by shg
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    Re: Forecasting

    I agree with MrShorty. You need to be able to describe your situation enough so that we can understand what the variables might be. What are the factors that affect sales volume? Is this is a seasonal business? Are you trying to forecast in the same granularity as what your data is? You just have a single column for Forecasted Sales--is that a single figure for all of 2018? Your data is weekly but only for 17 weeks. If that is actual data for 2017, it is not enough data for a reliable forecast for all of 2018.

    In short, your problem is not an Excel problem, it's a business problem, and you may not have enough data to solve it.

    (I am not an expert in forecasting but I took a graduate course in that subject so I have an understanding of it.)
    Jeff
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    Re: Forecasting

    Dear MrShorty and 6stringjazzer,

    Thank you for your quick response. I have attached a new file with all the sales data from the whole year including all the products. Instead of 2017, I have taken data from 2016 and previous data from 2014 and 2015. Sadly enough this is all the data I have. Therefore, I understand it is very difficult to forecast the sales data for 2017 with this little data. I am looking to forecast every weekly sale for each product for the whole year. Our bookyear is from the 1st of November till the 31st of October. The data is from a big garden furniture trading company and is therefore seasonal indeed. The problem is that there are many factors that influence the data, such as weather, discounted goods, delivery delays, delivery time frames, etc. This cannot be taken into account while forecasting. MrShorty, thank you for your useful link. I have taken a look at the link and have selected the following methods I believe are useful for forecasting the data. Naive approach, drift method, seasonal naive approach and time series method. I am not quite known with these methods therefore I am hoping you could maybe help me decide which method is best.

    Cordially,

    BremmesN
    Attached Files Attached Files

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    Re: Forecasting

    As indicated, this is well outside what I do and know, so I probably should just let 6StringJazzer respond and bow out of the discussion. However, if I understood Wikipedia's description of three of those four algorithms, then seem so simple that I am uncertain if I understood them correctly. If I understood them correctly, I am surprised that you are having difficulty programming them in Excel.

    Naive method: It looks like this method assumes that all forecasted values are the same as the last observed value. Assuming that is the value in column BA, then one formula for forecast values beyond that week might be =$BA2 (note the mixed reference). An HLOOKUP() function could probably also be used, though it would be a lot easier if you had real numbers in row 1 rather than those text strings (or a helper row with real numbers -- perhaps the first date of each week or a number of week since start of period kind of number no matter what algorithm you end up choosing, I suspect that this will be a useful step for most algorithms -- get a useful T variable in the spreadsheet). =HLOOKUP(DATE(2017,10,24),$B$1:$BA$10000,row(),true) assuming you choose a lookup value and first row based on dates.

    Seasonal naive: Same thing -- assume all future values for a given "season" (how are you going to define season?) are the last observed value for that season. Again, a simple HLOOKUP() is my first thought.

    Drift: Assume a straight line forecast that connects the first and last observation. I would probably extract those two data points into a separate table (using HLOOKUP() or simple direct references), then use SLOPE() + INTERCEPT() or LINEST() to get m and b for this straight line, then use those to compute forecasts.

    As for the time series methods, you don't indicate which of those several methods you are wanting to use. As I noted above, Excel has the built in functions that use linear regression techniques to do this (see help files for LINEST(), FORECAST(), TREND(), GROWTH(), LOGEST(), etc.). Excel 2016 introduced the FORECAST.ETS() functions that use a specific exponential triple smoothing algorithm if that is more what you have in mind.

    As indicated, the first three of those algorithms seem so simple, I am not sure I understood them correctly. You might spend some more time with those, make sure I understood them correctly, and see what you are having trouble understanding about these algorithms. More detail about your desired time series algorithm will probably be needed before tackling your desired time series algorithm.

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    Re: Forecasting

    Dear MrShorty,

    Thank you for your response and elucidation. I am currently indeed spending time on those methods and trying to understand them and choosing the best one. Perhaps 6stringjazzer can assist me further and see if he has any thoughts on the workbook I posted.

    Cordially,

    BremmesN

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    Re: Forecasting

    I have taken data from 2016 and previous data from 2014 and 2015.
    I am trying to sort out this description against the attachment. The data you attached goes from Nov 1 - Dec 31 then from Jan 1 - Oct 31 the following year. Which years does this data represent?

    You only have 1 year's worth of data here at the product level. You cannot do a forecast for a year into the future based on one year's worth of data. I would want to see at least three year's worth of data for a forecast that is worth anything. (You have more numbers at the summary level, but you said you wanted to forecast by product.)

    The forecast for the data you have provided would just predict that the same data be repeated, unless we make a whole lot of assumptions about how to interpret the data. The only assumption so far is that the data is seasonal. I would just be able to look at sales in the first month and assume that any month-over-month increase in sales from the previous year would be carried over throughout the following year, but that is not very reliable.

    I will try to get some time to post a sample forecast, not for your data, but which would show how this kind of thing works.

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    Re: Forecasting

    Here is an example of one I did for fuel sales. There are two years' worth of data. The business is seasonal and I used a quadratic model. This is just to give you an idea what can be done. There is a chart that shows the original data, then it shows the model with the data predicted by the model. You can see that the model fits the data nearly perfectly, which is unusual.

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    Re: Forecasting

    Dear 6Stringjazzer,

    Thank you a lot! This is exactly what I needed to continu with my project.

    Cordially,

    BremmesN

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    Re: Forecasting

    Although I don't do any forecase, is there a 'bookmark' on this thread/post?

    So that if in the future, I happened to come with forecast problem, I can refer back to this post

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    Re: Forecasting

    @dluhut: I use thread subscriptions for that sort of thing. Just above the first post in the thread (off towards the right) is a series of dropdown menus, one named "Thread tools". Select this drop down menu, and one of your options should be "subscribe to this thread". In the page following, click on "add suscription" to add this to your subscription folder. To access subscribed threads, go to User CP (Top of page below excelforum banner). There should be a "view all subscriptions button" as well as a "My subscriptions" box with link(s) to your subscription folder(s).

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