SCM Question Set 1

1. Observations of the demand for a certain part stocked at a warehouse during year 1985
were:

Month Deman Month Deman

d d
January 89 July 223
Februar 57 August 286
y
March 144 Septembe 212
r
April 221 October 275
May 177 Novembe 188
r
June 280 Decembe 312
r

Compute the one-step-ahead three-month and six-month moving-average forecasts for July
through December. What effect does increasing N from 3 to 6 have on the forecasts?

2. For the data in Q1, use the arithmetic average of the first six months of data as a baseline
to initialize the exponential smoothing.
a) Determine the one-step-ahead exponential smoothing forecasts for August through
December, assuming α = 0.20.
b) Compare the accuracy of the forecasts obtained in part (a) with the one-step-ahead six-
month moving-average forecasts

3. Two forecasting methods have been used to evaluate the same economic time series. The
results are:
Forecast from Method 1 Forecast from Method 2 Realized Value of the Series
223 210 256
289 320 340
430 390 375
134 112 110
190 150 225
550 490 525
Compare the effectiveness of these methods by computing the MSE, MAD, and the MAPE.
Does each of the measures of forecasting accuracy indicate that the same forecasting
technique is best? If not, why?

4. A large automobile repair shop installs about 1250 mufflers (a device that absorbs noise,
especially one used with an internal-combustion engine) per year, 18 percent of which are for
imported cars. All of the imported-car mufflers are purchased from a single local supplier at a
cost of $18.50 each. The shop uses a holding cost based on a 25 percent annual interest rate.
The setup cost for placing an order is estimated to be $28.
a) Determine the optimal number of imported-car mufflers the shop should purchase each
time an order is placed, and the time between placement of orders.
b) If the replenishment lead time is six weeks, what is the reorder point based on the level of
on-hand inventory?
c) The current reorder policy is to buy imported-car mufflers only once a year. What is the
additional holding and setup cost incurred by this policy?

5. A national park, has kept close tabs on the number of guide tours using the park since its
opening in January 1993. For the first six months of operation, the following figures were
recorded:

Month # of Tours Month # of Tours

January 133 April 640
February 183 May 1876
March 285 June 2550

a) Draw a graph of these six data points.

Assume that January = period 1, February = period 2, and so on. Using a ruler, fit the best
straight-line fit of the data. Estimate the slope and intercept from your graph.
b) Compute the exact values of the intercept a and the slope b from the regression equations.
c) What are the forecasts obtained for July through December 1993 from the regression
equation determined in part (b)?
d) Comment on the results you obtained in part (c). Specifically, how confident would you be
about the accuracy of the forecasts that you obtained?