section 4 30 The number of eases of me SUPPLY AND Deano PLAssiNG lot wine sold by the Connor Owen winery in an eight-year period is as follows: Yea Casts oF MetLor Wine Year Casts or Mentor Wie 2002 270 2006 358 2003 36 2007 00 2004 ve 2008 40 2005 456 2009 6 Using an exponential smoothing model with an alpha value of 0.20, estimate the smoothed value calculated as of the end of 2009. Use the average demand for 2002 through 2008 as your inital forecast then smooth the forecast forwatd to 2009. CASE: Atravox EvectRONics Altavox is a manufacturer and distributor of many different elec tronic instruments and devices, including digitalsnalog. sult ‘eters, funetion generators, oscilloscopes, frequency counters, and other test and measuring equipment. Aktavox sells a line of test miters that are popular with professional electricians. The model ‘VC202 i sold through five distributors to retail store inthe United States, These distributors are located in Atlanta, Boston, Chicago, Dallas, and Los Angeles and have been selected to serve different regions inthe country ‘The model C202 has been a steady seller over the years due silty and rugged construction. Altavox does not consider Wex 1 2 6 win OS 0 Boston 265 “ Chieago n Balas 64 u 2 4 ™ a QUESTIONS 1 Consider using a simple moving average model. Experiment with models using five weeks’ and three weeks’ past data. The past data in each region is given below (week —1 is the week before week 1 in the table, ~2 is two weeks before week I, etc.) Evaluate the forecasts that would have been made lover the 13 weeks for each distributor using the mean absolute deviation, mean absolute percent errr, and tracking signal as criteria Altavox Data woe “5-4-3? one SS toton 2B] Cheo 8 2 RM 4 Oils Sw w 5 0 4 & Tool 25453425288 this a seasonal product, but there is some variability in demand. Demand for the product over the past 13 weeks is shown in the Following table. These data are contained in an Excel spreadsheet Aliavox Date, ‘The demand in the regions varies between a high of 40 units on average per week in Atlanta and 48 units in Dallas. This quarter's data are pretty close to the demand last quarter. ‘Management would like you to experiment with some forecast ing models to determine what should be used in a new system being implemented. The new system is programmed to use one of two ‘madels: simple moving average or exponential smoothing, yas) 1213 Avamae ar 40 0 % @ & 3% 4% 5 8 Byes 8 6 o 6 5 8 6 7 2 8 ee ee) 204 m4 m9 m2 2. Next, consider using a simple exponential smoothing model, In your analysis, test wo alpha values, 2 and 4. Use the sec eis ak = bea i ‘Assume tha the initial previous forecast for the model using am apo valve of i the past three-week: average For the ‘model using an alpha of 4, assume thatthe previous forecast is the past five-week average, Altavox. is considering a new option for distributing the ‘model VC202 where, instead of using five distributors, only 8 single distributor would be used. Evaluate this option by snalyzing how accurate the forecast would be besed on the demand aggregated across all regions. Use the model that you think is best from your analysis of questions 1 and 2. ‘What are the advantages and disadvantages of aggregating demand from a forecasting view? Are there other things tht should be considered when going from multiple distributors toa single distributor? ‘This materials only tobe usedin conjunction with MBA lecturesDrax Maxaceaer AND Fonecastine SuPer Quiz IL This is type of forecast used 1o make long-term decisions such as where to locate a warehouse oF how many employees o have i & plant next year This isthe type of demand that is most appropri ate for using forecasting models This is a term used for actually influencing the sale of a product or service, 10 4 Theve are the six major components of demand 5) Thistype of analysis is most appropriate when the Past isa good predictor ofthe future u 6 This is identifying and separating time series data into components of demand. R 7 Ifthe demand in the current week was 102 units and we had forecast it 10 be 125, what would be next week's forecast using an exponential smoothing model with an alpha of 0.3? Assume that you are using exponential smoothing with an adjustment for trend. Demand is increasing chapter 15 563 ata very steady rate of about five units per week: ‘Would you expect your alpha and delta parameters tobe closer to one or ero? ‘Your forecast is, on average, incorrect by about 10 percent. The average demand is 130 units ‘What isthe MAD? 1f the racking signal for your forecast were con ‘istently positive, you could then say this about your forecasting technique. ‘What would you suggest to improve the forecast \lescribed in question 102 You know that sales are greatly influenced by the amount your firm advertises in the local paper. What forecasting technique would you suggest tying? What forecasting fool is most appropriate when closely working. with customers dependent on your products? 1. Strategic forecast 2. independent demand 3, Demand management 4, Average demand for the period, rend, seasonal clements, cyclical elements, random variation, and autocorelation 5. Time series analysis 6, Decomposition 7.118 units 8. Zero 9. 13 10. Bias, consistently too low 11. Add a ttend component 12. Causal relationship forecasting (using regression) 13. Collaborative Planning, recasting, and Replenishment (CPFR) SELECTED BIBLIOGRAPHY Diehl FX. Elemento Forcast he, Mason OV South Wester ove Upper Sule ne ND Perce a St Footnotes 1 Inaddiono dependent an nepenent dence atone alee complementary products cas elaioaships 2 An emution forthe sand ene tat coin eer compu 5, = VEE 3 Some water refer cal Fa amoathd aerge 4 Shen expe sang sre ince the i oe stating point may be obtained by sng simple ema ran aerage of peccuig prods such the average of he at 0 ee peo '5 Special hanks to Gene Feder or lp with his section. Gene Pet “Hiascl Foren: bes and Use Gulieioes” Indl Managemen! & Dot Stns 10.1200 pp. 512 6 Marshall Fsber “What Is the Right Supply Chain for Your Pret” Hervant Busnss Review March-Apeit 1997, pp is, Maik 8; S.C. Wheelwright and RJ, Hyman. Forecast: ‘Metods for Management New Yor: ibn Whey & Sens, 198,