Priori forecasting, Corporate Finance

Assignment Help:

Chang and Fyffe (1971) assume that a ?rm has a ''long-run sales history of individual seasonal-style-goods SKUs or groups of such SKUs''. They propose to estimate demand by using regression on those historic sales, also based on the ''outcome of some observable variable''. However, they do not explain in detail how that can be done nor do they test the method using real data. It seems dif?cult to apply this method in the apparel industry, as long-run sales histories of very similar products are rare.

Chambers and Eglese (1988) discuss the use of preview demand data that are gathered by sending out a preview catalogue (whichdoes not necessarily include a full product range) to a sample comprised of several thousand regular customers and offering themthe opportunity to order products at a discount before the season starts. They assume that an aggregate forecast for the full product range is given, and propose to forecast the demand for a product line by multiplying the aggregate forecast with the fraction of total preview demand for products in that product line. They further propose a second, slightly more sophisticated forecasting method,which takes into account that the ratio of total demand to preview demand ('the scaling factor') may not be the same for all  product lines. These methods are very suitable and, indeed, have been developed for an apparel mail order company.

Thomassey and Happiette (2007) propose a decision-support system based on neural networks, which automatically performs item sales forecasting. The system is designed to deal with many characteristics of the apparel market: large number of items, short lifetimes, substitution of most items with each new collection, long lead times, and in?uence of many external factors like the weather,promotions, fashion, and the economic environment. The proposed system is composed of three steps: obtain prototypes of demand behavior using a clustering procedure on historical demand data, (2) link these prototypes to descriptive criteria (e.g. price, lifespan or materials) using a probabilistic neural network, and (3) assign each new item to a prototype based on the item's descriptive criteria. Forecasts generated by the proposed model on a set of 285 new items from a French apparel distributor have a MAPE of 147%. So, accuracy is low despite the complexity of the method. For this reason, we decided not to include this method in our comparative study. The results in Section 5 will show that the simpler methods that we do consider are all more accurate (for our data set).


Related Discussions:- Priori forecasting

Should the firm take on the warehouse renovation, Question: (a) Discuss...

Question: (a) Discuss the concept of financial gearing and its implications for share price maximisation. (b) A firm has both, a current and a target debt-equity ratio of 0.

Definition of electronic banking and electronic money, Question: (a) G...

Question: (a) Give a definition of electronic banking and electronic money. (b) Outline the main differences between smart cards, credit cards and debit cards. (c) Giv

Describe the essential characteristics of money, Question: (a) Describ...

Question: (a) Describe the essential characteristics of money. (b) Keynes identified three motives for holding balances of money. (i) What are these three motives?

Do mergers encourage the formation of new banks, Do mergers encourage the f...

Do mergers encourage the formation of new banks? A: Yes. The rise in the number of new banks in the second half of the 1990s coincides with a surge in merger activity in the

LEVERAGE, what will be impact on the operating leverage of a firm if it pr...

what will be impact on the operating leverage of a firm if it proceeds for additional borrowings

Briefly the automated clearing house different participants, Problem: (...

Problem: (a) The Automated Clearing House (ACH) is an electronic payment network used by individuals, businesses, financial institutions and government organisations. (i) Ou

Calculate the price of maturity assuming, a)    Calculate the price of a Eu...

a)    Calculate the price of a European style call option with 6 months left to maturity assuming a risk-free rate of 3.5% and a non-dividend paying stock which can change in price

Replacement decision, #question.Baobab rolling mills owns a lathe machine w...

#question.Baobab rolling mills owns a lathe machine which was purchased 10years ago at sh. 75 million. The machine had an expected life of 15 yrs at the time it was purchased, and

DIVIDEND POLICY, The managing directors of three profitable listed companie...

The managing directors of three profitable listed companies discussed their company’s dividend policies at a business lunch. Company A has deliberately paid no dividends for the p

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd