1、Time Series AnalysisBenefits and Uses of Time Series Benefits of time seriesMonitor sales performance over time remove variation in monthly sales caused by calendar differences and seasonality that can conceal potential problems with sales Accurately determine the direction and rate of growth/declin

2、e in sales Quickly identify changes in sales trends and correlate them to factors affecting sales industry, company, competitionImprove decision making regarding sales and marketing actionsUses of time seriesAssess current sales performance and evaluate the effectiveness of sales programsDetermine u

3、nderlying sales trend and project year end salesEstablish appropriate budgets for next year and estimate monthly budget spreadsTime series analysis is the primary sales analysis technique at A-BTime Series AnalysisWhat is Time Series Analysis?How are Time Series plots developed?What are the advantag

4、es of Time Series Analysis?What are Time Series used for?What is Time Series Analysis ? Time series analysis is a statistical technique used to analyze and monitor sales volume over time.Why Time Series ?Beer sales are highly seasonalIt is very difficult to evaluate monthly sales over time.How do ti

5、me series work? Monthly variation in sales is caused by two major factorsSeasonalitySelling Days (calendar effects)Time Series technique statistically removes the effects of these two factorsTime Series technique uses the X-11 procedure for seasonal adjustmentsThe X-11 procedure was developed by the

6、 U.S. Bureau of Census in the 1950s. It was brought to A-B in the early 1960s and has become the standard for reporting sales.How do time series adjust sales ? A selling day adjustment factor for each month is computed and applied to the raw sales This factor allows you to compare months as if they

7、had the same number of selling days e.g. accurately compare the June this year vs. June last yearA seasonal factor is computed and applied to the selling day adjusted sales This factor, when applied, gives you monthly data directly comparable to any other month e.g. accurately compare June this year

8、 with May this yearSelling Days All other things being equal, sales in Aug-03 would decrease 4.8% because of one less selling day. In order to compare the two months Aug-03 sales will have to be adjusted up +4.8%.Seasonality Seasonality is expressed as an index for a month compared to an average mon

9、th.A month where sales were 20% higher than average would have a seasonal factor of 120.A month which was 10% lower than average would have a seasonal factor of 90.Strong SeasonalityNo SeasonalityAdjusting Sales Raw Sales X Selling Day Factor Seasonal FactorSeasonally Adjusted Sales = How do time se

10、ries work?Raw SalesSelling Day AdjustedSeasonally AdjustedDissecting a Time Series Plot Annualized Sales tells us how big the market is.Trend Line tells us the direction of sales based on past & present performanceIrregular variations shows us the impact of market place actionsSTRs; Ontario STCsData

11、 Description tells us the type of data plottedAdvantages of Time Series Advantages of time series:Removes variation in monthly sales caused by calendar differences and seasonalityHelp us to accurately estimate the direction and rate of sales growth/declineThey are an improvement over other methods s

12、uch as year-over-year growth or moving averages because they show us what is happening sooner an early warning of changing sales conditionsTime series significantly improve decision makingAllows us to take corrective action soonerAllows us to take the right corrective actionHelps to establish approp

13、riate sales objectivesAdvantages of Time SeriesIf the time series shows a relative smooth pattern from one year to the next the trend and the year over year growth would provide roughly the same reading.But, if there was a significant market event or change, the year over year trends will be mislead

14、ing+50%Misleading Growth Rates0%+21%More Misleading Growth Rates -21%+15%What are time series used for? At A-B we use time series toAssess current sales performanceDevelop current year sales projectionsPYE (projected year-end)Forecast next year sales develop budgets and monthly spreadsOther quantita

15、tive sales analysisAssessing Sales Performance How is our YTD performance?Assessing Sales PerformanceEstimating PYE If there is no change in the business environment sales will continue on current trend. Points off the trend line can be used to estimate monthly sales.Underlying TrendPredictedUnderly

16、ing TrendUnderlying trend is a trend line that best describes the current sales growth rate.It is the collective representation of all underlying factors that are influencing sales industry, competition, and company specific, etc.It is determined using a best-fit line to a set of points on the time

17、series. The points are selected based on in-depth understanding of the underlying factors influencing sales, how they have changed over time, and how they will likely change in the future.Points of inflection on the time series often signal changes in the underlying factors and hence the underlying

18、trend.Estimating PYEPredictedActual SalesPredictedSeasonally Adj. Sales Selling Day Factor X Seasonal FactorMonthly Sales = Establishing Budgets and Spreads Given our YTD Sep-2003 performance what would be an appropriate budget for next year and how should that volume be spread by month?Establishing Budgets and Spreads Another Example Using Time SeriesAnnualized STRs in M BBLS199819992000200120022003Elasticity CalculationP1: 18.99; P2: 20.45 i.e. +7%V1: 44.5; V2: 38.5 i.e. -14%Elasticity = -2.0E