Time Series AnalysisBenefits and Uses of Time Series Benefits of time series Monitor 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/decline in sales Quickly identify changes in sales trends and correlate them to factors affecting sales industry, company, competition Improve decision making regarding sales and marketing actions Uses of time series Assess current sales performance and evaluate the effectiveness of sales programs Determine underlying sales trend and project year end sales Establish appropriate budgets for next year and estimate monthly budget spreadsTime series analysis is the primary sales analysis technique at A-B2021/12/20 星期一2Time Series Analysis What is Time Series Analysis? How are Time Series plots developed? What are the advantages of Time Series Analysis? What are Time Series used for?2021/12/20 星期一3What is Time Series Analysis ? Time series analysis is a statistical technique used to analyze and monitor sales volume over time.2021/12/20 星期一4Why Time Series ? Beer sales are highly seasonal It is very difficult to evaluate monthly sales over time.2021/12/20 星期一5How do time series work? Monthly variation in sales is caused by two major factors Seasonality Selling Days (calendar effects) Time Series technique statistically removes the effects of these two factors Time Series technique uses the X-11 procedure for seasonal adjustments The X-11 procedure was developed by the 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.2021/12/20 星期一6How 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 had the same number of selling days e.g. accurately compare the June this year vs. June last year A 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 with May this year2021/12/20 星期一7Selling 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%.2021/12/20 星期一8Seasonality Seasonality is expressed as an index for a month compared to an average month. 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 Seasonality2021/12/20 星期一9Adjusting Sales Raw Sales X Selling Day Factor Seasonal FactorSeasonally Adjusted Sales = 2021/12/20 星期一10How do time series work?Raw SalesSelling Day AdjustedSeasonally Adjusted2021/12/20 星期一11Dissecting 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 Description tells us the type of data plotted2021/12/20 星期一12Advantages of Time Series Advantages of time series: Removes variation in monthly sales caused by calendar differences and seasonality Help us to accurately estimate the direction and rate of sales growth/decline They are an improvement over other methods such as year-over-year growth or moving averages because they show us what is happening sooner an early warning of changing sales conditions Time series significantly improve decision making Allows us to take corrective action sooner Allows us to take the right corrective action Helps to establish appropriate sales objectives2021/12/20 星期一13Advantages of Time Series If 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 misleading+50%2021/12/20 星期一14Misleading Growth Rates0%+21%2021/12/20 星期一15More Misleading Growth Rates -21%+15%2021/12/20 星期一16What are time series used for? At A-B we use time series to Assess current sales performance Develop current year sales projectionsPYE (projected year-end) Forecast next year sales develop budgets and monthly spreads Other quantitative sales analysis2021/12/20 星期一17Assessing Sales Performance How is our YTD performance?2021/12/20 星期一18Assessing Sales Performance2021/12/20 星期一19Estimating 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 TrendPredicted2021/12/20 星期一20Underlying Trend Underlying trend is a trend line that best describes the current sales growth rate. It is the collective representation of all underlying factors that are influe