Demand & Forecasting

DEMAND & FORCASTING Founded as a single store in 1960, Dominos pizza pie pie today stands as the recognized world leader in pizza delivery. From the beginning, we drop been dedicated to the best of service, quality products and delivery excellence. They currently have over 9000 stores worldwide, every(prenominal) dedicated to providing great-tasting pizza delivered directly to your door or available for carryout. They have pioneered the pizza delivery business, and sell more than than cd million pizzas worldwide every division.Dominos Pizza is recognized as a Megabrand by Advertising Age magazine, and has been named Chain of the form by Pizza Today, the leading publication of the pizza industry, three times (dominoes). Metuchen is a very small town in Middlesex County, NJ. It is located right in the middle of Edison, NJ. It is only 2. 76 squargon miles with a population of over 13000. The median income is around $90000. There is approximately 5300 fellowship consisting of 2 . 56 people. And 30% of the population is under 18 long time old (US Census). This can be interpreted as at that place are mostly families with kids in this community.Currently, on that point are no fast food pizza stores or whatever other fast food restaurants in the town. Edison does have many restaurants including two Dominos, one in South Edison and one in North Edison. However, incomplete of them delivers to Metuchen. The only direct competitor in the area is Pizza Hut. Metuchenites practically get to know their local merchants and get personalized service they get under ones skin missing at large chain stores in the nearby shop malls Metuchen). Based on the Metuchen demographic information, I chose the following variables folks, income, and impairment of panegyrical goods.I believe households to be more relevant than population based on the fact that the town consists of families with one or more children. A household ordain consume one or more pies per visit. And p eople with children are more standardizedly to buy fast food. I chose to use income because income along with the fluctuation of hurt is a major factor for the beseech of pizza. alike we utilise the variable for the wrong of the complimentary good Soda. People more or less always buy soda or some other salute with their pizza. Although, there are some family owned competitors, I did not entangle them in this analysis because they are a ifferent type of pizza store. Dominos specializes in fast food delivery. And many of the family owned does not. VARIABLES Year Qd price/pie soda/ liter population households Income 2010 125000 5 1 13,574 5,249 88,241 2011 127000 5. 49 1. 25 13,648 5,376 91365 2012 129000 5. 99 1. 5 13795 5491 94,410 Elasticity refers to the magnitude and the direction beat demanded changes in response to a percentage change in the variable. Based on the information collected, we determined that all of the variables are inelastic. The price elasticity is 0. 1 63 and the price elasticity of soda is 0. 64. This means that the change in price will result in a lesser percentage change in bill. Basically this shows that the fluctuation in price will not mend the demand too much. This is also true for the income. The income elasticity is 0. 452. This shows that if income increases, the demand for pizza will increase at a lower rate also. When price goes up, the Qd will go down based on the disposable income of the families. The income is higher(prenominal) enough to withstand the price increase. This is also true for the itemize of households. theater elasticity is 0. 661. ELASTICITY rice/pie soda/ liter population households Income 0. 163 0. 064 2. 935 0. 661 0. 452 0. 173 0. 079 1. 462 0. 736 0. 473 springless Inelastic Elastic Inelastic Inelastic Smoothing techniques assumes that a repetitive key pattern can be found in the historical determine of the variable being forecasted. The piteous average is calculated by winning an avera ge of past observations. The more observations included, the greater the smoothing effect. It gives the same weight to all the observations. The exponential model allows you to determine the weight of the observation between 0 and 1.Below we used quartette different smoothing techniques to forecasts the demand for pizza for years 2013-2015. The four models show the demand to be between 127500 and 128500. DEMAND FORECAST Year Actual Demand 5 year Moving Average 3 year Moving Average exponential function Smoothing w=0. 9 Exponential Smoothing w=0. 3 2007 126000 126000 126000 2008 129000 126000 126000 2009 131000 128700 126900 2010 125000 128667 130770 128130 2011 127000 128333 125577 127191 2012 129000 127600 127667 126858 127134 2013 128300 128200 127000 128786 127694 014 128100 128060 128100 128349 127876 2015 127480 128467 128125 127943 The root mean square error is used to evaluate the accuracy of the forecasting model. The lower RMSE means the estimate is more accurate. RMSE RMSE 811 1933 2790 2377 Based on the RMSE for each of the estimates, I would estimate the 3 year moving average to be the best estimate. Although the 5 year moving average has a lower RMSE, I dont call back it is an accurate estimate because there are not enough years to get an accurate estimate. Based on the information collected, we could open a Dominos in the community and expect to do well.The forecast for demand of pizza seems to fluctuate between 127500 and 128500. Although the forecasts seems pretty stable, it doesnt look like there will be too much growth unless the number of households and income have a larger increase that previously. The inelasticity of variables shows me that as price goes up, there will be a smaller decrease in quantity demanded. However, the income and the number of households are also inelastic. As incomes and households grow, so will the quantity demanded by a smaller increase. The price elasticity is smaller than the income and household elas ticity.So overall the quantity demanded should increase. WORKS CITED United States Census Bureau, US department of commerce, retrieved October 22, 2012 from http//quickfacts. census. gov/qfd/states/34/3445690. html Income Tax List, retrieved October 27, 2012 from http//www. incometaxlist. com/new-jersey-income-tax-by-zip-code-33. htm Dominos Pizza, retrieved October 27, 2012 from http//phx. corporate-ir. net/phoenix. zhtml? c=135383&p=irol-homeprofile Borough of Metuchen, retrieved October 23, 2012 from http//www. metuchennj. org/brochure1999. pdf