Forecasting Lost Sales Case Study

1030 Words Apr 10th, 2015 5 Pages
Tiffany Henault
March 3rd, 2015
Quan901-CH2
Forecasting Lost Sales
Case Study
Section I: Summary
Carlson Department store suffered heavy damage from a hurricane on August 31. As a result the store was closed for four months, September through December. Carlson is in dispute with its insurance company regarding the lost sales for the length of time the store was closed.
Section II: Problem Identification
Two issues to address are the amount of sales Carlson department store would have made if there had been no hurricane and if they are entitled to any compensation for excess sales due to increased business activity after the storm.
One further important factor is that eight billion dollars in federal disaster relief and insurance money
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*See attached Excel spreadsheet for further clarification/breakdown of forecasting methods. However, although the linear trend line can be useful it can also prove to be inappropriate for business retail sales. Real trends change their slope and intercept over time and rarely tend to follow a fixed straight line. Therefore, linear regression with seasonality will be used to determine lost sales.
In the past five years Carlson’s overall monthly average for sales was 2.43375. The monthly averages for the months under consideration are as follows; September: 1.8975 October: 2.215 November: 2.775 and December: 4.1875. Approximately thirty nine percent of Carlson’s sales occur within the Sept through December months. The seasonal index as show in figure 6.7 further breaks this down.
While reviewing Carlson department store’s forecasted sales for September through December and taking into account that the time frame is during the holiday season; it is apparent that sales typically increase during this period in relation to
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