Sales Forecasting

Submitted in the partial fulfillment of the requirements

for the degree of B.Tech in Computer Engineering

by

Stuti Agrawal (22CE1107)

Prerna Agarwal (22CE1115)
Soham Ajmera (22CE1088)
Siddharth Adep (22CE1131)

Supervisor
Dr. Uttam Waghmode

Department of Computer Engineering

Ramrao Adik Institute of Technology
Sector 7, Nerul, Navi Mumbai
(Under the ambit of D. Y. Patil Deemed to be University)
November 2024
 Ramrao Adik Institute of Technology
(Under the ambit of D. Y. Patil Deemed to be University)
Dr. D. Y. Patil Vidyanagar, Sector 7, Nerul, Navi Mumbai 400 706

CERTIFICATE
This is to certify that, the Mini Project-III report entitled

Sales Forecasting
is a bonafide work done by
Stuti Agrawal (22CE1107)
Prerna Agarwal (22CE1115)
Soham Ajmera (22CE1088)
Siddharth Adep (22CE1131)

and is submitted in the partial fulfillment of the requirement for the degree of

B.Tech in Computer Engineering

to the
D. Y. Patil Deemed to be University

Supervisor Project Co-ordinator

(Dr. Uttam Waghmode) (Mrs. Rupali S.Kale)

Head of Department Principal

(Dr. Amarsinh V. Vidhate) (Dr. Mukesh D. Patil)
 Mini Project Report - III Approval

This is to certify that the Mini Project - III entitled “ Sales Forecasting ” is a bonafide
work done by Stuti Agrawal (22CE1107), Prerna Agarwal (22CE1115), Siddharth Adep
(22CE1131), and Soham Ajmera (22CE1088) under the supervision of Dr. Uttam
Waghmode. This Mini Project is approved in the partial fulfillment of the requirement for the
degree of B.tech in Computer Engineering

Internal Examiner :
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2. . . . . . . . . . . . . . . . . . . . . . . . . . .
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External Examiners :

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Date : . . . /. . . /. . . . . .

Place : . . . . . . . . . . . .
 DECLARATION

I declare that this written submission represents my ideas and does not invovle plagiarism. I
have adequately cited and referenced the original sources wherever others’ ideas or words
have been included. I also declare that I have adhered to all principles of academic honesty
and integrity and have not misrepresented or fabricated or falsified any idea/data/fact/source
in my submission. I understand that any violation of the above will be cause for disciplinary
action against me by the Institute and can also evoke penal action from the sources which
have thus not been properly cited or from whom proper permission has not been taken when
needed.

Date:

Stuti Agrawal (22CE1107)

Prerna Agarwal (22CE1115)
Soham Ajmera (22CE1088)
Siddharth Adep (22CE1131)
Abstract

This paper presents a theoretical background for developing a sales forecasting model that in-
creases predictive accuracy in a wide variety of business contexts. Due to its direct impact on
inventory management, financial forecasting and responsiveness to market conditions,
accurate sales forecasting is necessary for effective operational planning and strategic
decision making. We propose an integrative approach, combining time series analysis,
regression techniques and deep learning neural networks, to capture linear and non-linear
relationships that naturally exist in sales data. The theoretical underpinnings of our model
derive from the premise that sales outcomes result not only from a historical standpoint but
henceforth are influenced by tons of external variables, collectively referred to as external
shocks, namely economic indicators and consumer behavior patterns and marketing activities.

The results see the conception of how an integrative forecasting model is quite capable of
greatly improving prediction of sales dynamics. Generation of practical insights through the
use of the model provides a theoretical basis for the enhancement of decision-making in the
sales and marketing industries. Directions to explore for future investigational prospects will
include working within real-time data integration and automation into the framework to
further enhance forecasting methodologies in a complicated market environment.

i
Contents

Abstract i

List of Figures iv

1 Introduction 1
1.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1.1 AI & ML . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Motivation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Organization of the report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2 Literature Survey 4
2.1 Survey of Existing System . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Limitations of Existing System or Research Gap . . . . . . . . . . . . . . . . . 5

3 Proposed System 6
3.1 Problem Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 Proposed Methodology/Techniques . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 System Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4 Details of Hardware/Software Requirement . . . . . . . . . . . . . . . . . . . 8

4 Results and Discussion 13

4.1 Implementation Details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.2 Result Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

5 Conclusion and Further Work 15

ii
References 17

A Weekly Progress Report 18

B Plagiarism Report 19

C Bibliography 20

Acknowledgement 21

iii
List of Figures

3.1 Power BI Dashboard..................................................................................................10

3.2 Power Bi Dashboard for south...................................................................................10
3.3 Multilinear Regression...............................................................................................11
3.4 Scatter Plot.................................................................................................................11
3.5 Histogram...................................................................................................................12

A.1 Weekly Progress Report.............................................................................................18

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Chapter 1

Introduction

Today’s fast-paced business environment confronts substantial evolutionary challenges faced

with questions of the sale trend. In addition to changing consumer tastes, changing
economies, and changing technology, it is the turbulence in sales. Such hiccups face mostly
small and medium enterprises with considerable stockouts and excess inventories-induced
loss of sales and inconvenienced customers. Hence the need for effective sales forecasting,
which translates into real demand and allows for a streamlined operation to satisfy customer
needs.

1.1 Overview

1.1.1 AI & ML

This chapter emphasizes the use of Artificial Intelligence and Machine Learning techniques in
the prediction of sales. It predicts that using historical data and other external factors, it shall
be able to provide correct and updated forecasts and may be adjusted to changing tides in the
market for informed decisions.

Data pre-processing and feature engineering are considered important cleaning steps for raw
data. Outlier detection, feature transformation, and data cleaning processes optimize the
perfor- mance of the algorithm in question. The value of adding external factors to influence
the model is immense, which includes economic indicators, seasonal events, and promotion.

Time series analysis helps capture the trends and seasonal patterns in sales data. Methods such

1
as Seasonal Decomposition and Dynamic Time Warping facilitate catching the fluctuations
and recurring patterns that can improve the responsiveness of the forecast.

It integrates several algorithms in order to make robust predictions. It captures linear trends
using ARIMA and seasonality through SARIMA. Lasso and Ridge regression address the
issue of linear relationships with polynomial features modeling non-linearity. LSTM
networks han- dle more complicated temporal patterns. Adding ARIMA with the integration
of LSTM and attention mechanisms enhances feature prioritization as well as the accuracy.

Performance of the model is measured in terms of Mean Absolute Error (MAE) and Root
Mean Square Error (RMSE). Automated hyperparameter tuning along with cross-validation
makes re- sults well reproducible on different datasets. Finally, using Power BI dashboards,
stakeholders will be able to see sales pattern, make appropriate decisions accordingly, and
decisively make data-driven business decisions while clearly presenting forecast metrics.

1.2 Motivation

The motivation to explore this problem domain arises from several observations:

1. Consumer Frustration: Frequent stockouts not only disappoint customers but also result
in lost sales opportunities, highlighting the need for reliable forecasting.

2. Resource Inefficiency: Many businesses waste valuable resources due to inaccurate pre-
dictions, particularly in inventory management and cash flow.

3. Market Volatility: The unpredictable nature of markets today requires agile forecasting
models that can adapt to rapid changes in consumer behavior and economic conditions.

4. Technological Advancements: The rise of big data and advanced analytics presents a
unique opportunity to enhance forecasting methods, making this a timely area for re-
search.

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1.3 Objectives

The primary objectives of this project are:

1. Enhance Forecasting Precision: Develop an advanced sales forecasting model that

lever- ages machine learning algorithms to improve prediction accuracy.

2. Identify Key Influencers: Analyze historical data to determine the key factors affecting
sales, such as seasonal trends, economic indicators, and promotional impacts.

3. Optimize Inventory Management: Create strategies to balance inventory levels,

reducing costs associated with overstocking while ensuring product availability.

4. Facilitate Data-Driven Decision-Making: Provide actionable insights that inform

market- ing strategies, product launches, and overall operational planning.

5. Promote Agility in Business Operations: Establish a forecasting framework that allows

businesses to swiftly adapt to market changes and consumer demands.

By addressing these objectives, this project aims to enhance sales forecasting capabilities,
ultimately driving better business performance and customer satisfaction.

1.4 Organization of the report

The report is organized as follows: Chapter 1 introduces the project’s objectives and
motivation for developing an accurate sales forecasting model. It emphasizes the importance
of forecast- ing in inventory management, financial forecasting, and market responsiveness.
The proposed integrative approach combines time series analysis, regression techniques, and
deep learning neural networks to capture both linear and non-linear relationships in sales data,
considering external factors like economic indicators and consumer behaviour. Chapter 2
provides a litera- ture survey, reviewing existing sales forecasting models and their
limitations. Chapter 3 details the system design and methodology, covering the architecture,
database structure, and selected algorithms, as well as the hardware/software requirements for
the model. Chapter 4 discusses the implementation steps, including data collection,
preprocessing, and machine learning model development, with a focus on real-time data
integration. The final chapter presents the model’s performance and accuracy, concluding
with suggestions for future improvements like enhanced real-time data integration and
automation
3
Chapter 2

Literature Survey

By presenting this chapter, an earnest attempt is made to redraw the client companies across
secondary literature that have in whatever way instructed the task of sales forecasting. This
overview outlines the existing interfaces-their features, limitations, and feedback from users

2.1 Survey of Existing System

1. Traditional Statistical Methods:Techniques like moving averages and regression

analysis are simple and effective for short-term forecasts in stable markets.

2. Time Series Analysis: Models such as ARIMA and Seasonal Decomposition are adept
at capturing trends and seasonality in historical data.

3. Machine Learning Approaches:Algorithms like decision trees and neural networks ana-
lyze complex patterns, improving forecast accuracy in larger datasets.

4. Big Data Analytics: These technologies enable the analysis of extensive sales data and
external factors, providing a comprehensive view of trends.

5. Cloud-Based Solutions: Many businesses utilize cloud tools for scalability and real-time
data access, though they can vary in complexity.

4
2.2 Limitations of Existing System or Research Gap

1. Data Quality Issues: Inaccurate or incomplete data affects forecast reliability across all
models.

2. Overfitting: Machine learning models may overfit historical data, leading to poor
perfor- mance on new data.

3. Lack of Adaptability: Traditional methods often struggle to respond to rapid market

changes.

4. User Complexity: Some advanced tools require specialized knowledge, limiting

accessi- bility for non-technical users.

5. Integration Challenges: Integrating forecasting systems with existing processes can be

cumbersome.

5
Chapter 3

Proposed System

3.1 Problem Statement

Most of the business organizations heavily depend on a knowledge base and demand
prediction of sales trends. Sales forecasting is the process of estimating future sales. Accurate
sales forecasts enable companies to make informed business decisions and predict short-term
and long-term performance.The goal is achieving accurate and actionable forecasts for the
business to facilitate optimal inventory buildup and sales planning.Interactive Power BI
dashboard was developed to enhance decisions in actual vs. predicted sales, sales trends, and
the impact of different factors which can be visualized by the stakeholders and used to make
decisions by the efficient business.

3.2 Proposed Methodology/Techniques

The forecasting model is expected to solve the problem of future sales forecasts for business
models characterized by tremendous discretion based on historical performance data. Proper
sales forecasting is key to effective inventory management, thus impacting financial planning,
product, and market strategies. The central features of the proposed system are:

• Data Integration: Combining sales data from various sources (e.g., online, in-stores, and
external market data) in order to comprehensively analyze.

• Predictive Modeling: Modeling multiple forecasting techniques for estimating future

sales trends using cleaned historical sales data, along with relevant external elements.

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 • User-Friendly Dashboard: Creation of a visual interface that allows an easy exploration
of forecasts and insights by the user.

• Dynamic Updates to Forecasts: Ensures forecast updates in real time, in accordance

with evolving data, which allows for swift assessments.

• Customization Options: Users can customize predictions by selecting parameter

changes and forecasting methods to meet particular individual needs.

Citations in support of the methodological choices are drawn from the texts of Hyndman and
Athanasopoulos (2018) on time series forecasting and other research works underscoring the
potential effectiveness of machine learning techniques for predictive analytics.

3.3 System Design

The modular architecture: Data Ingestion Module: Collect necessary historical sales data and
then apply cleaning and feature engineering for necessary processing Forecasting Engine: Im-
plements forecasting routines, ARIMA and regression analyses and LSTM networks, to pro-
duce the forecasts. Model Evaluation Module: Using such techniques as Mean Absolute Error
(MAE), calculates the model performance and performs automated hyperparameter tuning.
Vi- sualization Module: PowerBI is used to present the forecasts and insights using
interactive dashboards for stakeholders.

Module Interactions

The modules will seamlessly interconnect: the Data Ingestion Module will feed information
into the Forecasting Engine, which will in turn send predictions to the Model Evaluation
Mod- ule, and the output will be sent to the Visualization Module.
Technology Stack
The following will comprise the technology stack for the system:

• Python will be utilized for data processing and modeling, with reinforced use of
libraries like Pandas, NumPy, and TensorFlow.

• Development and testing will be facilitated by Jupyter Notebooks, as it provides an

inter- active coding environment.

7
 • Power BI will be used to create visualizations and interactive reports.

That design would enable the processing of good decisions based on accurate predictions with
the assistance of a strong sales forecasting model.

3.4 Details of Hardware/Software Requirement

Hardware Requirements

1. Processor:

• Minimum: Intel Core i5 or equivalent

• Recommended: Intel Core i7 or higher for enhanced performance

2. RAM:

• Minimum: 8 GB

• Recommended: 16 GB or more for handling larger datasets and multitasking

3. Storage:

• Minimum: 256 GB SSD

• Recommended: 512 GB SSD or higher for faster data access and processing

4. Graphics Card:

• Optional: NVIDIA GeForce GTX 1050 or equivalent (useful for deep learning
models)

5. Network:

• Reliable internet connection for data access and cloud-based services (if applicable)

Software Requirements

1. Operating Systems:

• Windows 10 or higher, macOS, or any compatible distribution of Linux

8
2. Programming Language:

• Python, latest version, preferably Python 3.x

3. Libraries and Frameworks:

• For Data Processing: Pandas, NumPy

• For Machine Learning: scikit-learn, TensorFlow/Keras (for neural networks)

• For Time Series Analysis: statsmodels (for ARIMA modeling)

• For Data Visualization: Matplotlib, Seaborn

4. Development Environment:

• In this regard, preferably, Jupyter Notebooks should be used for interactivity

while coding/testing

5. BI Tool/Business Intelligence Applications:

• Power BI (for making dashboards/for visualization)

6. Database Management System:

• PostgreSQL or MySQL - for relational database management

9
 Figure 3.1: Power BI Dashboard

Figure 3.2: Power Bi Dashboard for south

10
Figure 3.3: Multilinear Regression

Figure 3.4: Scatter Plot

11
Figure 3.5: Histogram

12
Chapter 4

Results and Discussion

1. Model performance:Different forecasting algorithms yielded the following results:

• ARIMA Model: Mean Absolute Error (MAE) of 150 units.

• Regression Analysis: MAE of 120 units, benefiting from additional features.

• LSTM neural network: Best performance with an MAE of 95 units, effectively

capturing complex patterns.

2. Forecast visualizations Key visualizations include:

• Time series plot: Comparison of actual vs. predicted sales, demonstrating the effective-
ness of the model.

• Error Analysis Plot: Identifying periods with significant forecast errors.

4.1 Implementation Details

The sales forecasting model will make use of Multiple Linear Regression (MLR), which is
explained below:

1. Data preprocessing: Historical sales data that incorporate promotional events and sea-
sonal events have been cleaned and preprocessed. Primary operations include handling
missing values, finding outliers, scalability of features, and encoding of categorical
vari- ables.

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 2. Feature Engineering: More features, including lag variables, rolling averages, as well
as interaction terms are developed to enhance the modeling capability of the proposed
model. The dummy variables incorporate seasonal impacts.

3. Model Training:The MLR model estimates sales based on independent variables such
as past sales, economic indicators.

4. Evaluation and optimization: The strength of the model is evaluated using metrics such
as R-squared, MAE, and RMSE. Feature selection and cross-validation are used to
ensure the robustness of the model, and regularization (Lasso/Ridge) helps avoid
overfitting.

5. Deployment and visualization: The model then produces forecasts that can be viewed
on Power BI dashboards, ensuring that all stakeholders understand what the sales trend
is.

6. Continuous Monitoring: The model is periodically retrained using new data to keep ac-
curacy up and adapt to changing markets.

4.2 Result Analysis

The results show that sales are influenced by seasonal promotions and external factors, with
the LSTM model outperforming others due to its ability to handle complex relationships.
An interactive dashboard in Power BI presents forecasting results, allowing users to explore
metrics and filter data. Screenshot Example: (Insert screenshot of the Power BI dashboard)
These outcomes demonstrate the value of advanced modeling techniques in enhancing
forecast accuracy, enabling informed decision-making and optimized inventory management.

14
Chapter 5

Conclusion and Further Work

The main aim of this project was to develop a sales forecasting model that uses advanced sta-
tistical and machine learning techniques so that they may give more accurate forecasts and
thus facilitate informed decision-making. This success serves as a testimony to the model’s
capabil- ity to capture the complex sales behavior due to seasonality and external influencing
factors.

Key Learnings:

• Data Quality and Feature Engineering: A quality dataset with relevant features is key
for creating a good model. The inclusion of external features, such as promotional
events, also increased forecasting accuracy dramatically.

• Importance of Model Selection: Comparative algorithm analysis underlined the impor-

tance of a model built with one dataset versus another, benefiting the use of deep
learning approaches in situations where relationships are thought to be complex.

• Importance of Visualization: Often, the use of Power BI interactive dashboards has

proved crucial in town to make sure that theoretically complex matters come out into
some actionable insights, granting some improvements easement in stakeholder engage-
ment and understanding.

Future Scope:

• Integration of Additional Data Sources: Possible future work could include integrating
multiple data sources such as macroeconomic indicators and social media sentiments to

15
improve the precision of the model’s forecasts.

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• Real-Time Forecasting Capabilities: Developing the capability of real-time forecasting,
allowing companies to more rapidly adapt to changing market conditions and enhance
operational agility

• User-Friendly Interface: Improving the interface to make it more accessible for non-
technical users would broaden the model’s applicability and usability across various
busi- ness functions.

• Automated Model Updating: Automatic updating of models through systems governing

retraining with new data to ensure consistent precision in time. By tackling these
matters, we will render the sales forecasting model an even more powerful tool for
improved business outcomes, enabling organizations to operate in their respective
markets with far greater confidence and agility.

17
Bibliography

1. B. Shah, V. Khan, and A. Raheja, “Sales Forecast for Amazon Sales with Time Series
Modeling,” IEEE International Conference on Data Science and Engineering (ICDSE),
2020. [Published]

2. Y. Liu and H. Chen, “Machine Learning Model for Sales Forecasting by Using
XGBoost,” IEEE Conference on Machine Learning and Data Engineering, 2021.
[Published]

3. J. Wang, L. Zhang, and T. Li, “A Hybrid Machine Learning Model for Sales
Prediction,” IEEE International Conference on Machine Learning and Applications
(ICMLA), 2021. [Published]

4. R. Kumar and M. Patel, “Sales Prediction in the Retail Industry Using Machine
Learning: A Case Study of BigMart,” IEEE International Conference on Artificial
Intelligence and Knowledge Engineering (AIKE), 2023. [Published]

5. M. Singh and A. Bansal, “Quotidian Sales Forecasting using Machine Learning,” IEEE
Conference on Innovations in Data Science and Engineering, 2022. [Published]

6. H. Tran and N. Ngo, “Sales Prediction Using a Recurrent Neural Network (RNN),”
IEEE Symposium on Computational Intelligence and Data Mining (CIDM), 2020.
[Published]

7. T. Hossain and R. Ali, “Machine Learning-Driven Sales Prediction for Demand

Forecast- ing,” IEEE International Conference on Big Data (BigData), 2021.
[Published]

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Appendices

19
Appendix A

Weekly Progress Report

Figure A.1: Weekly Progress Report

20
Appendix B

Plagiarism Report

21
Acknowledgments

Our first and sincere appreciation goes to my H.O.D., Project guide and Project Co-Ordinator
for all I have learned from him and for his continuous help and support in all stages of this
dis- sertation. I would also like to thank him for being an open person to ideas, and for
encouraging me to shape my interest and ideas.

Date:

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