Today we are going back in time to help us predict the future!!!

Time Series Analysis

The End Result . . . .

Lesson Objectives• To understand what Time Series Analysis

is

• To be able to calculate Moving Averages

• To be able to calculate Variations

• To evaluate how Time Series Analysis can aid management decision making

Forecasting

Identifying the Trend

Work out the moving average for the below figures:

1991 1992 1993 1994 1995 1996 1997 1990 1999 2000

300 500 600 550 600 750 850 1,100 800 1,100

Work out the moving average for the below figures:

1991 1992 1993 1994 1995 1996 1997 1990 1999 2000

300 500 600 550 600 750 850 1,100 800 1,100

466.7 550300+500+600

3

1991 1992 1993 1994 1995 1996 1997 1990 1999 2000

300 500 600 550 600 750 850 1,100 800 1,100

The Answer

1991 1992 1993 1994 1995 1996 1997 1990 1999 2000

300 500 600 550 600 750 850 1,100 800 1,100

467 550 583 633 733 900 917 1000

TASK TIME

• Draw the graph (on graph paper):

• Show sales• Show the 3 point moving average

The Graph

1991 1992 1993 1994 1995 1996 1997 1990 1999 20000

200

400

600

800

1000

1200

Sales3 Point Moving Average

Year Sales £000

1 50

2 60

3 48

4 55

5 70

6 50

7 60

8 75

9 50

10 70

Year Sales £000

1 40

2 30

3 70

4 45

5 35

6 75

7 60

8 40

9 85

10 70

11 50

12 90

The Graph

1991 1992 1993 1994 1995 1996 1997 1990 1999 20000

200

400

600

800

1000

1200

Sales3 Point Moving Average

The 4 Point Moving Average

TASK • Calculate the 3 and 4 period moving

averages for as many years as you can to complete the table

• Plot the sales figures and both trend lines onto a graph using graph paper.

• Comment on the relationship between the trend and the actual sales figures.

Period 1 2 3 4 5 6 7 8 9 10

Sales

100

130

160

175

180

190

190 180

220

250

3 period

4 period

Period 1 2 3 4 5 6 7 8 9 10

Sales

100

130

160

175

180

190

190 180

220

250

3 period

130

155

172

182

187

187 197

217

4 period

Period 1 2 3 4 5 6 7 8 9 10

Sales

100

130

160

175

180

190

190 180

220

250

4 poin

t

8 Poin

t

4 Poin

t Average

565

645

705

735

740 780 840

1210 1350 1440

1475

1520

1620

Variation

• Variation = Actual Data – Trend Data

Seasonal Variation

1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0Q 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

115 101 112 80 105 130 115 80 105 140 125 105

Yr 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0

Q 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

150 175 130 115 125 145 135 100 125 136 160 145

Yr 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0Q 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

250 275 240 255 230 260 220 180 195 170 140 155

Advantages of TSA

Disadvantages of TSA

Quick Question

Evaluate how TSA might assist managerial decision

making