RMIT Vietnam

OMGT2085-Introduction to Logistics & Supply Chain Management

Topic: Demand Management

Exercise 1: Demand Forecasting

The information included in this document is to allow you to apply the Time Series Analysis method of
demand forecasting to predict future demand for products.

Forecast the yearly sales for the Shaving Cream and Eye Cream for 2017 using the information in the
table below. Explain the reasons for your forecast (see solutions at the end of the document).

Cost Sales Sales Sales Sales

2014 2015 2016 2017

Shaving Cream $2.99 unit 700,000 735,000 740,000 ?

Eye Cream $150.00 unit 110,000 120,000 118,000 ?

Economic Growth % 3.8% 2.9% (1.3%) 1.2%

Unemployment % 6.2% 6.6% 8.8% 8.9%

Rate

Note: It is common to show negative figures in parentheses. Therefore, the economic growth in 2016 in
the table above shown in parentheses is minus 1.3% (-1.3%).

Exercise 2: Demand Planning

Article readings
https://en.wikipedia.org/wiki/Collaborative_planning,_forecasting,_and_replenishment
http://www.sdcexec.com/article/10289594/cpfr-considering-the-options-advantages-and-pitfalls
http://www.scialert.net/fulltext/?doi=ajie.2010.89.104&org=12

Discuss key success factors for CPFR in SCM

Factor 1:
Factor 2:
Factor 3:
Exercise 3: Order fulfillment

Article Reading
https://www.bigcommerce.com/blog/ecommerce-fulfillment/#deciding-which-ecommerce-order-fulfillment-
model-to-use

For each fulfillment model below, identify benefits and costs to the business and an example of a real-
life fulfillment model.

Fulfillment model Benefits Costs Examples of each model

Integrated
fulfillment

Dedicated
fulfillment

Outsourced
fulfillment

Drop-shipped
fulfillment

Store fulfillment

Flow-through
fulfillment
 Answers
Exercise 1: Demand Forecasting

Forecast the yearly sales for the Shaving Cream and Eye Cream for 2017, using the
information in the table below. Explain the reasons for your forecast.

Sales Sales Sales Sales

Cost
2014 2015 2016 2017

745 000
Shaving Cream $2.99 unit 700,000 735,000 740,000 to
760 000

Eye Cream $150.00 unit 110000 120000 118000 116 000

Economic Growth % 3.8% 2.9% (1.3%) 1.2%

Unemployment % 6.2% 6.6% 8.8% 8.9%

Rate

Note: It is common to show negative figures in parentheses. Therefore, the economic

growth in 2009 in the table above shown in parentheses is minus 1.3% (-1.3%).

Explanation of the forecast

Shaving cream would likely continue growing as it is considered a staple product (it is not
affected by the state of the economy or by the unemployment rate). Shaving cream sales
grew in 2015 and 2016, when economic growth was negative. Therefore, a predicted
demand of 745,000 – 760,000 would be reasonable. (Sales grew by 5,000 in 2009 when
economic growth was -1.3%; economic growth will be stronger in 2017 (+1.2%) and
therefore an increase in sales of between 5,000 and 20,000 is reasonable.)

The eye cream would be considered a luxury product (its sales are affected by the state
of the economy). The eye cream sales have grown slower than economic growth.
Therefore, a predicted demand of 116,000 or so would be reasonable. (Sales
decreased by 2,000 in 2016 when economic growth was -1.3%; economic growth will be
stronger in 2017 (+1.2%) but unemployment will increase slightly to 8.9%; therefore a
decrease in sales of between 2,000 is reasonable. This follows another decrease of 2,000
from 2015 to 2016.)