Uncertainty, Data, and Judgment

Group Assignment on “Harmon Foods, Inc.”

Hardcopy of the report is due on Session 16 (before the beginning of the class). Please
write the names of all the group members on the cover page.

Be ready to present your solution in class: bring a copy of any material you need for your
presentation (e.g., USB drive).

The grade for the assignment, based on the hardcopy of your report, will be distributed
together with the exam grades. Your report should be as short as possible, addressing the
points below.

1. Using only data on monthly shipments of Treat, provide a forecast for shipments of
Treat in January, 1988. Give a 95% prediction interval for this forecast.

2. Develop and estimate a model that makes the most sense to use for forecasting
monthly shipments of Treat cereal, starting with the independent variables from the file
“HARMON for analysis.xls” (under “class material”, session 16). Please include the
regression output of your model in your report.

3. Argue for your model.

- How does it compare with other possible models (if you include/delete some
independent variables, etc.)?
- Check whether regression assumptions are satisfied. (Briefly summarize your
conclusions from the residual analysis.)

4. For the next month, January 1988, the planned amount of Consumer Packs is 100,000
cases and Dealer Allowances are set at $500,000. Use your model to predict Sales in
January 1988. Please report a point estimate and a 95% prediction interval.

5. Interpret the regression coefficient for time and construct an 80% confidence interval
for it. If you do not have independent variable “time” in your model, please add it (only
for that question) in order to provide an 80% confidence interval.

6. If some extra budget becomes available, would you allocate it to Consumer Packs or
Dealer Allowances? (For that question, do not provide any confidence intervals – use
only point estimates of regression coefficients.)
Uncertainty, Data, and Judgment

Harmon’s Food Case

 
At the beginning, we tried to answer the question, “Why is it crucial for Harmon Foods to
Have accurate sales forecasts?” We talked about how it affects production 
schedules, limited space to store the materials, advertising and promotional expenditures
(particularly TV spots), cost of labor (if not productive, they are losing money). In this
case, we started talking about running regressions. We talked about why it is 
so important for Harmon’s to have accurate sales forecasts. 
We had someone in class talk about Chick-fil-a and how important it is to look at trends
and events to forecast. We talked about the time series method and trying to figure out
the trends and the seasonality. We took a look at how Harmon was forecasting sales
simply by looking at the trends. It is important for us to take a look at the data (by
plotting it) and see what is going on. It was essential for accurate production forecasts for
the health of the entire business. The schedule changes are extremely important because it
extremely expensive to change everything. It also created disappointed customers