-wardling involves using current factors, Past data, to reduce Uncertainity

↳ aren't always accurate

↳ Represent the causal mechanism
↳ better for than individuals due to cancelling effect
groups
↳ Over time, the
racy of
the forecasts end-up lossing accuracy

- I
businesses which require more forecasts and
accurate end-up using shorter time horizons

uncertainty increases with time horizon

Two
Forecasting Approaches:
-

which subjective inputs

↳ Non-technical
use
techniques, alone HOWEVER Good to
and hence, cannot be used
I difficult to
quantify
↳ mix

Guantative Techniques
with quantative forecasts.

moreinterest
↳ Time series

historical data
of the

Y= f(Y - -error)
-
,
predict future outcomes
deationsby created using
predictor variable to

-Time Series:
↳ Assumptions: (i)thecanonlyhappen vesderateat causal discovery/assumption)

↓
(iii) At= Actual Demand
Ft Forecasted Demand
=

Procedures:

I
Look at the patterns
↳(i) (Average) or constan -:
horizon pattern
data
(ii) Trend -: movement (upward/downwards the in

(ivi) Variations:"Too types explainabled Random noise

caused they known unextainable or chance based

factors

(v) Seasonality -:
repeated regular wave like movements. Less than one
year spattern time horizon)
(vi) Cycle:variations lasting more them I
year
(pattern time horizon)
> 3 Methods:
> NainApproach: StabletimesenceData At: w=seasonala t
Length

I
Data with trend:It: Ar-,(A__, At.)
Et 2 At-1 Azz
=>
=
-

periods) #aegrant
(MA):Femiprevious
Averaging Methodimple Moving Averages

Ex. A, 650 =
N3
=

Az 678 =

As
720. Fn
=

720

8+
=

=
682.67

What would be
your
15 forecast be at the end of week 3.3 (You don't know AL

-
Two options for methods
Approach:fu F5
682.87
=
to use:

628+
1206
-
=

① Naive
Ahead Calculations:
=693.62
② Use the Multi-Step
An =>

F
=

-+
F
 an
258

+850
+

650618

si
678

e
+

few
Averageof
# the last actual data value, updatee

enrt e I
↳earytocalculatump

periodIdem3
Forecast but
lays we behind change

Choose the number of period to include

↳ fawer data points:move sensitive (i.e. more responsive) to most recent
changes but also sensitive to the random variation
↳ data points:
more
smoother but has responsive to real/most recent changes

↳ Combare MC1) M(n) with

·
Weighted Moving Averages most recent one.
↳ Why? MA gives
old data the same
weightage as the

ghted
↳WeiTypically Averages different weights
Moving enables
to recentdaton:Intuitive
assigns more
weights

Weighted Movings F 5 =

(Weight period) X (Demand period)

Averages
WiAt-1 w2A-zt.... WiAt-n
= +

↳ WitWnt..... I
Wn=
+

Example:

bI oat I demand I
A, 650, A2=678,
=

Ase Fore
0.5
Weights:
0.3

#highestweightto give
the

(20x0.5 +

(678x0.3) 150x + 0.2)

= 693.4

Dean IYP,Gr.3
Ex 2. Period and Forecast

weights
0.5,03,02
i
5

(19x0.3) (23 0.5)

6 =
x

(6x0.2
-

26 +
7

Exponential Smoothening
WMA
↳ The challenging
in
choice of weights is

↳ Formuk -> New forecast previous

-

forecast %
+

of previous forecast error (Actual -

Forecast)
-
↓

Exponential Smothering:Fi E,
=

+ ()(A1.TE) C) smothers
=

(< di
Alternative form:E = (1 -

a) E., CLAt +

# OR
C = actual ()%(previous actual) (1-(1) (previous forecast)
weight on demand +

1- previous forecast

I
the
a =
weight on

Ex. A, =
820, d 0.1
=

Az 7 75
=

steps to conduct Exponential Smoothening:

> F, A, 5 820
Initialize (set) F, Fs F2 0.1(A-fr)
=

F, A, =
. +
=
or
-> Forecast for period 2

Fz F, 0.1(A, -Fi)
Generallyrepeatforforecasteine
Fz F, d(A,
F) - -
+

0.1(75-820
820
=
+ +
= =

815.5
-

F2 820
=
A c
-

Impact of the smoothing constant

↳ The degree of quickness of adjustment by forecast error

Ithe theseare naar

greatewr ewabeage?
In is forecant
ERROR
sig

3
I I as
Ex. Week
Demand F, A 1 820
=
=

· i awar
Erinis
the * dates has
weight recent sunstable)
6 EO
to smooth
3 a) -> more
Higher
(0.05, 0.51
-

I
-Generally acceptable range tends to
be to
change
↳ low when underlying is susceptible

↳ high
average
stable underling
when

Fin
I I
Ex. Weck Demand Forecent

I I
Actual Forecast I 20 -to (F, A1)
=

65
60 1 7 75
Fz 3204 (0.5(820-82)
=

2
55 Fz F,
=

0.4(65 60)
+
-

3 650
F3 820
475-80)0.5=
= +
197.5

f)
so F5 Fz 0.4(55
-

4
+

3 655 795.5 (68 797.5)0.5 738.75

Fy
=

= -
+

4 64
Fy F,=

+
0.4 (84-Fu) 5 55 730.76
=
+

0.5x/655-738.75)

Forecalling
-

wring trends

↳nea,fil ed alineregressionwarhearfohentic smile en

Trendyande-bitabletan
Linen

a re
as

period
t
live
1.57
-

by 699.4 Y-5Ix

IIinsert
Sals 2

j
Ex. Work B 10 =

y yanu*
i
TuO

: y
-
182.0
6

49

Ear
 I II
Week (t) (y) E ty
Ex. Saly

I 150

i
I

2 M 314

3 9 476

Y
i

areinte
sothat t
942.55
6.44

=E I
G
-

I
↳2.4
I
13.
-

Double exponential Smoothing(Trend Adjusted

Smoothing)

usedfordatawithtrendbut noseasonalDate
in

* d=smoothing constant
B
=Smoothing
constant for trend

Trend Adjusted Forecast

exponential ysmoothedaverage (F)thusboth the average heatede

THF = a

predictions

E d(At) (1 x)(F
=
Tr)0 d+ -

,
+

(1- )T,0 = 1
I B(E E) +
-

TAF:E+Tt
:

#Unless otherwise stated, use the following estimates

F, A,=

trend based on initial periods

the
+, Az-A,:
=
measure of

of
andseen
Choice

to reduce forecast errors

General Case
typically c
-

STAG=
Step 0:Fi Al
Fitt,
=

T, Az-Al
=

( x)TAFE
c(At) (1 c))(F if 1) (At.)
-
+

Sup1: F = + - -

period Case =
3

Step 8:F, 9 T, T B(f F) (1 B) T

=
+
+
+ -

-
1

F, Al
TAE=Ft It

G(An
=

e
+

As
T, Az- =

=
Tz
TAF=F +
 d=0.4, B 0.1=

e
s

,I
=
275(0.4) + (D.6(285)
= 281

3e 0.9x35)
rob
so
250)
T 0(281
+
-

36.74
=

↳
39.57 375.45 =
34.6

Fy 285(0.4) (0.6x315.6)
=
+

303.36
=

Tu =

B(fu -
fs) +
(1 B).T -

=0.1x(303.38-281 (0ax34.6)
+

33.38
=
303.38
33.38
+

-e. 336.

F5 (350x0.4)
=
+
(0.6 336.14)
x

=342.04
Tu
T5 (F-fa)
=
+ 0.9x

33.38

=0.1(342.04-303.36)
+0.9x

=33.9)
15 T5 33.91 342.02
= +

375.95
=

Forecasting Error
Deviation
↳ Mean Absolute

↳ Mean Squared
Error

↳ Mean
Absolute Percentage
Error

M.A.D- l-Forecast: tel -> Weights errors

linearly (the same
on they are

Errors
-

Square
larger errors

Atual e)
to
Forecast)" -> -
more weight
ms.E ->
-

Forecasto=
)
MADET what
-Put errors in penspective

)->-wngi
relative
in errors
100x value
to theiractual

I I 80+0.6-os-son/sor- aIcne I
lEmar/ Ever MAD -93 =

stat
Ex. week Demand
I
-20 ↳
2 775 so
-

3 688
F =

9643.24
Zz.us
=

98.2
753.2
665
4
36.88
MSE B83

In
=

the
5 750 713.92 4
802 15. es
=7813.
I
 laut the
Ex

I II
MAB/NSE
thelower
2
Forecast 2 &
* the

25 797.5-117.95 117.5 13886.2 MSEof

MADE
=

better.
compare because
② Cannot line
series
of
different on
two
dependent different
MADEcontentas
372 35759
they are
0
Sum
0 93 7942.65
date
③ USE
it
atit

1689
MAD 8942.15
2
MSR
=

93,
= =

QualityControl
-

What I Why:
↳ Statistical
↳ to
-
ensure
techniques
process are
for
performed desired
in
monitoring
manner
and
testing the quality of good services
LowLost -High duction
volume
->
beieine
processes require less in

Low Volume
-> High cost
-

have
hence, more inspection
·
Defects serious
consequences
cost of hopedion cost of
Alwayscomeder the trackoffbetween defective is
# missing
it

Statistical Process Control:

-> Inspect

process inuk
sige
Output sample
↓

Out of Cantile
↓
companion Criteria usually
ananten

ACTION formed by finding

range
Find caused repair
quality

Variation
=>
E Control
variation
I all process field some

not variation from predetermined criteria is

every a a

that variation within acceptable range

concern!Issue is to make
is
cause
for sure

Nature Variation
of
↳ Random Variation:

↳Naturalcausedby counterminorfactors (Unimportantare

↳ Assignable Variationsource can be identified and eliminated

#Main goal of Statistical Qualitycontrol is to

UISH Assignable Variation from Random Variation
↳ How? -:
0Sample Statistics
② Sampling Distribution.
 Sampling
->

Distribution vs. Proces Distribution

-
↳ describes the random of sample statistics
variability
↳ Use about the sampling Distribution
Central Limiting theorem to gain info

chatfull
- approach Normal Distribution, irrested of the

awarmistributineg ne
the samble averages
in

↳ that as ramble size increases,

States Distribution of

battambanishinthearchitectpartidations
* -
same mean,
yet ovariabin nor

-> Control Charts

↳ Time ordered blot of sample statishis
↳ With Uppercontol limit
limits (UCL) & Lower Contol Limit (LCL)
a
shouldbut OF
whichmost valueofsamplestatistics CONTRO
↳Timik
within

↳stated
↳ termsof standand deviate barn theset
in of
in
covery

(99.7% probability of coverage

↳ general:
3
I std or
130

in I2 xo

-
* Only a
small percentage of means
fall
outside 2 or 3 standard deviations from the

process means "ratistic fall outdated

set limits, there is a
very
small probability -
20

(1 -0.74 0.0026
=
for 1304 1-95.44 0.256
=
for 1205
that value
affectsrandomnes

Type,anpre-rk) are fall owhide the limit

and and
though random variations are
sent

↳ FalsePolice has changed when infach it has atthe

impact on)
TypeIlerrowConsumerugh for 20 limits but notfor 30 limitsin

↳ Assuming process is in control when it is not i.e. False

Negative
*Ibractice two sigma three commonly used without specifically referring to
sigma are
or

the prodability of a
Type II error.

rules
(Typell) E Producers Risk (typel) throng usage of o r 30
25 or 20

Trade
·
Off between Consumer's Risk

①
wantthe central tendency (meal of here a re

② Charts
I
measure the process dispersion
R chart

Mean Charts
on=
If i s known, + 201
UIL=
⑤:
s tandard deviation of distribution of sample means

7:* standard deviation

z ou
5 of the
Estimate process
-

sample sizeitto numberofsample, isof

observations
n=
it in the samethe

=Average of sample means

Itnotanevention andof
usafter amending online ene
 Range Charts
↳ to
process despersion/spread

UCD re

rz,
nutrien
·

.. n 4
=
R 0.508
=

Control limits
30

UCL 2x
+
=

=10.122 +

(x 0.125 =10.128 -
3(0.125)
9.753
=

=10.503

If we didn't have o:
for m h
=

Az 0.23
=> =

UCL =
+

AcR

-0(023x
+
0.508) 10 e
=

=10.128 -

0.73 x0.508)

9.757
=

30Control Limits on
the
Range:D 3 0, =
D4 2.28
=

Da R

LCDor
UCL =

2.28x0.508
=

=1. 159

Ex2. R
n=10, 0.01,
=

Da 1.78
=

0.22
Dz =

UCL -> (1.78x0.01

=0.0178

LCL -> (0.22 0.0D x

=0.0022

Average Range
R 2 3 Y 5
Sampte
10.50

0.33
=

I 10.68 10.69 10.00

-

10.78 10.80 10.71 10.732

2 10.79 10.86 10.60 10.25 10.18 10.756 0.26 8 = 10.13 n 5

=

I 10.78 10.67 10.8 10.79 10.72 10.76 0.17 R 0.22

=

4 10.59 10.73 10.81 10.75 10.73 W0.73 0.22 Dn 2.11, Dy 0, A2

=
=

0.58
=

5 10.69 10.71 10.7 10.72 0.12

4 - AzxR
UCL:+A52(
=

6 10.75
10.71 0.M
e =10.13 -(0-5840.22)
7 10.79
10.73 0.27 10.856
=
=10.602

⑧ 10.74 10.62 0.67

u
bux
L =I
=

9 10.77
10.71 0.13 0.22
2 . 11 x
=

10 10.72 =0.4642 =0
10.73 0.17

II 10.79 10.75 0.16

12 10.62 10.77 0.25

13 10.66 10.73 0.35

14 10.81 10.78 0.16

15 0.10
10.66 10,54
mean
10.73 0.22
 z 3, C 0.02
=
=

" -For so 12.11-(8.01x) 1 e

than
=

on

D3

ZINCONTROL
n
=

0
=

D4 =2.28 Az 0.1 3
=

x 0x0.ous for the

UCL
=

2.2 8 x 0.046
=

O
=

=0.105

8 On both Mean & Range charts, the process is INCONTROL

Ex 5.

5
sample I sample 2 sample 3
sample sample
9.9
9.9
9
I
10.2
10.3
9.9
9.9 10.3
10.1

-
9.9
9.8

- o
-
o 39.6

9.9710.2
e

50.11
x 10. I 10.2
9.9
-

0.4 .
0.6
R 0.4
=

ost
0.6.

0.4
-> +

population parameter is not known, use n 4, Az 0.73, Dy

= =
=

2.28, D, 0 =

Mean Chart

3
UCL 10.04
=

(0.73x0.52) 10.4196
=

9.66
LCL 10.04 (0.73x0.52)
=

-
=

Range Chart
control
The is in
process

UCBYR8x e

R
LCL Dy
= x

=0x 0.52:0

Ex6a
proven std*0.08 509 E n5

5
=

=e
Ar 0.5
=
=

materiade
ButIe
ent
Mean art,ithighrise
5.01
=
(0.58x 0.115)
+

Fitfor
LC = 5.08
=

e L
=
-
(A2xR)
=5.0170.58XUe
4.94
=

Range ConholCharku, the

v 2.11X0.13
=

0e
=
 Inventory
stock to meet future demands
-> kept
Decision
->

of Inventory Management
↳ How much to order
↳ When to order

-> Characteristics
of Inventory Management:
↳ Demand:known is random

↳ Lead Time: known is random

↳ Review Time: continuous us periodic

-> Why control Inventory?

weatallcustomer
↳ Underslock:shock
3ontheetoestablisTrade
outs - service

↳ Over Stock: Excess mentory -> cashofcarry the

of

->
Components of Inventory Costs:
↳ Inventory Holding (Carrying) Cost Per Unit Held (H):

#usually represented
as annual ast an

H $/ unit/year
=

-> stated as either

per unit
↳ Percentage of
Dollar amount ->percent production
car
the purchased price, i.e
the**
of the purchase
price

↳ Total in
Cost:Charged proportional to the
average
level of inventory

↳mcreases as:
apoints whena
-
Obsolance, spoilage
and
breakage increases

Fixed) Cost Per Order:(s):

↳ Ordering(Setup or

per order, regardles of order size.

↳ expressed as a fixed dollar amount

↳ Ordering cost increases in the

↳ Administrative
following costs
and order
items:
costs
processing

↳ Shortage Cost:Cost of Running of↳ Qualityrespectionateat out stock

↳ Hardtoquanfaction and down in the

↳ Purchase Cost:Cost of buying the inventory

↳Largest ofmentory the as

↳ Impact themeat on caladehas bad

wentt
the

so
on

Perorientswithanew
->
Star
ener level monitored continuously
Inventory
->

->

When to order

-> Move appropriate for valuable items

Inventory Models
->

↳ Fixed order
quantity models
↳

↳ DemarestBromerewasqueenSea,nowoceantoplace an

3
and

en
Probabilistic Models

Demandorleadtime areunderthe #Manyordersproducename

↳

rageinnertoenterest
EconomicOrder Quantity
->

(D)-: known
is and constant over the
ene

↳ Lead Time (IT): constant andknown

↳
↳ Purchase we
metantaneous
price constant:no discount

↳ indirectly included the

Ifholding costsarespecified apercentage

in
unit cost, then unit cost

of
is
as

Objectiveminimizetotal annual bychemins 8aROP

host

how in
reulding in costs. However,
carying
a small order side

annual costs
necessitate frequent orders, which will drive up ordering
and
andering the
-Asander sizevaries,onetypeofcostwill inwearwhile theother namedBalanabe
man holdinag t
-
Total Cost Calculation

TC Annual
=

Holding Costs Annual

-

Ordering Costs
H: Inventory Holding Cost
(Carrynis)
cost per unit

S:Ordering (Setup) Cost per

order

TC HX =

(Average Inventory On Hand)

SCNumberagraders
+

is
a year
demand I

Handsthe
-

Arg.
mentory on
amount of order

Annual Ordering Cost

xS
=> =

cost: the
# +c
GH s
=

↳ What
minimisess"=/Demand
I
e
(Order open State
#TC EOG, where annual
is
minimized at and
carrying ordering costs are
equal.

↳
Costs 2 H
Holding
=

Ordery costs
xs
=

1. G EOG:
J
=

2. Reorder Point:
ROPug** atime
Demand

3. Minimum Total Cast: TagSH

Teog"
↳. (Reorder
Order Cych Time Cyle):

Ex. Amual Demand =

10,000 units

H 6,5 $75,D 10,000

= =
=

Ordus for

asa.a
-
-1500

$3000
re
langthof
and
10 da
=

port e

Annual Demand
If
15,000exes
=

Ordus per year: Laught of order

Man.
Ens
Cyber is
==
Tax12waas t
e
20
e
and

6
re
a
 QuantityDiscount Modelmanual
.
-

Ex1. Actual Demand lead time

10,000 7 Druchasingthe
Ordering
=
=

annual demand
Days
250
per year:
24 I PD-
Daily Demand:
50: 40 united
-

Optimal order
quantity:Largest (feasible) EOG
price per unit
or

ROP =

40x 7 280
=

units price breakpoint for lower prices

Quantity Ordered
-

Unit price

01 9 = 8, Pl
P, Pr>Pa
->
q,& qr Pz

&> an P
Ex. D 1 0,000
=
 Assignment (

Part A-1 Output: 10,000, sold for $10/hr

2:
Input
labour
Input Input
3

rate:$9/hr cast
of materials:$5,000 Material: $25,000
raw cost
of purchased
Labour Hours:5 0 0

,500==
Old:
2.8988

New:

or"10 =
=
a et

productivity increased

A-2 2.98

w
=

350w g
30,000 +

oe

W $12.45
=

Labour
2 B
Cost-Labour Cost (1-0.05)
-Labour Cost(0.95)

(0.95)
:Labour
Costzon= (9x500) ==
2.9178

- 4275

Labour Castors"4275x0.95 MFP 2

2025
=
2.94
=

4061.25 30,000
+

=4061.25

MFRos $2.898640
MAP
growth from 2023 to 2024: =
= 0.66%

MFP 2023 2.8986

Get

% annual MFR+++
7
MAR
B.2
growth
a
0.02
=

1.02 MFP
MFR=
=>

LGon-242023
MFPozn= MFPos
an
. 4.02

=2.9 x 1.02 =

2.958 in labour cost

2.958-0f
...

e
change:
-
-15. 414.
Labour lost 3506.63
=
92. A. MFP=

output

Output:Tuition:210x3 50 31500
=
=

Input: Energy 4000/per

=
class

Materials 20 per student

=

per class

OH 25000
= per class

MFP
31500,2500
=
1.05

Productivitultra
y
B. Labour at 25x16
=now

$18.5/w

LD student: 0.125/shad
Ior
in n

I I Work I Makita
MFD

I I
Labour/hrpue

WilQuspod
:

,6x40x12 220+
box us= 5e

2 337

3 322 1.15

354
1. 106
4

HW2.

22(a 0.1)
Forecast (a)
Squared (C 0.1
0.37
① Error Forecast
=

Demand
=

Month

0 F 1 Al 891
·y
= =

Jan 891
F, A,= 891
=

64 Fz F, (A1 F)( 891 0 891

A(Ai4-89)
= +
=
= + -

899 Fz =

295.84
Feb
243.36 0.1(899-89D 891.8
Fz
=

891
=
+

909 Fs 891 0.3 (899-89D 893.4 703. 31

=

March
+
=

0.1(909-891.8) 893.52
=

955.966 Fy =
891.8 +

Fr 893.4 0.3(909-893.4) 898.08

=

= +

Appl 867 3827.65

3570.77 893.52 0.1(867 893.52) 890.868
=

698.08):2 55.756 F5
= + -

0.3(86 &x

F5 898.08
-
+

=29
=

may 5304.21
0.1(829-890.860) 882.681 =

F, 890.866
+
7513.63
0.3(829 800.76)
=

755.76 +

870.83
=

Fs 54713.04
-

Jun
=

sae f 870.83
=
0.3(798-870.83)
+
848.98
=

2004.35
F1 854.681 0.1(798-884.68)
=
+
876.610203.n
=

0.3(775-845.98 8 2 6. =

0.1(775-876.0D 865.91
=

Fy 848.98 58 876.01
+
= +

Aug 782
=

826.77 0.3/782
826.777 1966.92 0.1(782 865.9D 857.52
Fa 865.91
813.39
= + - =

Fq
-

setI
= +
=

769

I 1227.80
F,0 857.52
=
0.1(269 + -
857.52) 845.69=

e ④Fo80000.3(765-8.
i 845.51) 840.303
840.67 0.1(765
N
=

Fx
+

789.53
=
 Fa TAF

I I I
T

Fatbin
I
2(a) week I Demand Forecast (C = 0.2)
MA(3) 7
F1 150
to
(157 150) +
so
i·
=

e
-
157
F2 150 150 7
+ =

.
=

15) x
150+ (152 0.9413
-

F3 =

7
=

ieee
Fy 153.52
=

62.8 164
= 94.2
+

157 7
+ =

=
157

0.4x1s21(+)(63163.2 6.92 16 e
=

F
+

192
=

rwin"-ecos
163.2
=

182.46 214 206.67

+
=

=>

2.e
=

(C) Double exponential:

E+Te
TAF=
a)(F T 1)
( x)(TA) dA+(1
+
-
-

4A,
=

F
-
+
=

T =

B(E f) -
+ (l- B) Ter
 O650: Operations Management / Summer 2023

HOMEWORK ASSIGNMENT #2
Submission:
• How: Only Through A2L (submission folder will be created)
• Due Date: Friday, June 2nd at 8 PM

• Computations: Please note that you cannot use Excel for calculations (you can use it mainly
for plotting). You need to show your calculations manually (handwritten or typed).
However, if there are too many SIMILAR calculations (e.g., using the same formula), then
you can illustrate your calculations for at least two instances manually and do the rest using
Excel.

QUESTION 1 (40 Points)

Mr. Harvey wishes to compare forecasts using different forecasting approaches. Demand for a particular
product had shifted downward last April because of a price increase. The following number of units were
demanded in the past 10 months:
MONTH UNITS MONTH UNITS
January 891 June 798
February 899 July 775
March 909 August 782
April 867 September 769
May 829 October 765
a) Using a smoothing constant of 0.3, prepare a simple exponential smoothing of the data. Assume an
initial value of 891.
b) Using a smoothing constant of 0.1, prepare a simple exponential smoothing of the data. Assume an
initial value of 891.
c) Compare the smoothed forecasts in parts (a) and (b). Does a decrease in the smoothing constant make
the forecasting model less sensitive or more sensitive to a shift in demand?
d) If the random movements in monthly demand are relatively large, would it be better to set the smoothing
constant relatively high or relatively low? Explain.
e) Forecast demand for November.

QUESTION 2 (40 Points)

The following past data is available on the weekly demand for a product:
Week Demand
1 150
2 157
3 162
4 166
5 177
6 185
7 192
8 197

Page 1 of 2
 9 209
10 214
a) Forecast the demand for weeks 1-12 using simple exponential smoothing with a = 0.2 (assume the first
week’s forecast to be equal to the first week’s demand) and weeks 4-12 using 3-period moving average
method.
b) Plot the forecast and the actual demand data: what can you say about using averaging techniques when
actual demand has a trend?
c) Forecast the demand for weeks 2-12 using the double exponential technique with a = 0.4 and β = 0.1.
Assume that F1=150 and T1= 7.

QUESTION 3 (20 Points)

Two independent methods of forecasting based on judgment and experience have been prepared each
month for the past 10 months. The forecasts and actual sales are as follows:
el
MONTH SALES FORECAST 1 actual
-

FORECAST 2
0.13
1 770 771 x10
769
=

7 70
-

2 789 785 go 787 -

3 794 790 792

4 780 784 798
5 768 770 774
-

6 772 768 770 -

7 760 761 759 -

8 775 771 775 &

9 786 784 788 e

10 790 788 788

8.59
Compute the MSE, MAD, and MAPE for each forecasting method. Does either method seem superior?
Explain.
MAD 8
=
2.8

4.7
MSE I
=

0.359%
MAPE 5
=

5
=

Page 2 of 2
 O650: Operations Management / Summer 2023
HOMEWORK ASSIGNMENT #3

Submission:
• How: Only Through A2L (submission folder will be created)
• Due Date: Thursday, June 8th at 23:59
• Computations: Please note that you cannot use Excel for calculations (you can use it mainly
for plotting). You need to show your calculations manually (handwritten or typed).
However, if there are too many SIMILAR calculations (e.g., using the same formula), then
you can illustrate your calculations for at least two instances manually and do the rest using
Excel.
Solved Problems 2023-05-30, 11:12 AM
&

Problem 2
QUESTION 1 (20charts
Control Points)
for sample mean and range. Processing new accounts at a bank is intended to
Processing average 10 minutes each. Five samples of four observations each have been taken. Use the
new accounts at a bank is intended to average 10 minutes each. Five samples of four
sample data below in conjunction with Table 10-3 to construct upper and lower control
observations each have been taken. Use the sample data below to construct upper and lower control limits
limits for both sample mean and sample range control charts. Do the results suggest that
for both mean and range
the process is incontrol charts. Do the results suggest that the process is in control?
control?
N 4
=

Sample 1 Sample 2 Sample 3 Sample 4 Sample 5

0.13
: Ac
=

10.2 10.3 9.7 9.9 9.8 28

2.
Du
=

9.9 9.8 9.9 10.3 10.2 O

ar
9.8 9.9 9.9 10.1 10.3 E
= A
-
re
x0.52
10.04
= 0.73
+

-
10.1 10.4 10.1 10.5 9.7

Totals ...... 40.0 40.4 39.6 40.8 40.0

x = 10.04

wnque
X 10.2 10 =

=
=

Y.

QUESTION 2 (35 Points)

* 102: 0.6 0.6 =
R 0.52
=

0.6
=

0.2

A grinding and deburring operation is monitored using a mean and a range chart. Six samples of 20
observations have been obtained, and the sample means and ranges computed:
v

SAMPLE MEAN RANGE

1 3.06 0.42 isent
2 3.15 0.50
3 3.11 0.41
4 3.13 0.46
5 3.06 0.46 vz 0.4540.
=

6
* 3.1
3.09
=
0.45
R 0.45
=
↑xR 0.1845
=

a) Determine upper and lower control limits for the mean and range charts assuming 3-s control
limits. tuck=Ixous LCx i-5x0.1)
=

3.019
=

b) Is the process in control?

Solution =3.181

c) What value of z would give an alpha risk of 3% for the process?

about:srcdoc Page 4 of 17

z(1 -
-
-

) z(0.955) =
=

Page 1 of 2
QUESTION 3 (45 Points)

An Internet service provider is interested in monitoring the length of customer service calls. Every week
the company randomlyen
samples 5 calls received that week. For each call, the length is recorded in minutes:
·Observatis =@°-x

SAMPLE 1 2 3 4 5 R X

1 17 22 11 19 14 11
10
2 25 21 20 15 18
3 19 16 25 10 15 15

4 17 25 14 25 21 9
5 25 17 25 17 16
5
6 17 20 19 22 17
14
7 20 11 22 11 25
8 13 25 19 24 11 14

9 22 21 23 11 16 12

10 15 13 19 24 19 11
11 16 13 18 14 25
12 17 19 14 19 20 6
13 18 18 12 25 24
14
15
- 19
15
19
23
19
19
24
22
13
15 y
16 10 15 16 15 22
17 15 14 18 24 16 10
18 12 14 18 13 16 6
19 21 12 11 19 15 10
20 13 23 24 18 18

a) Calculate the control limits for the !-chart.

i
[
b) Calculate the control limits for the "# chart. 5 Az
0.58
=

I
n
=

0
Di
=

c) Does the process appear to be in control? Explain. DY

2. 11

70.55
=

Res
=

UCL RxBu LCL

=

7 = B.2.11
=10.55x

22.26
=

X =

18
R
1 8 +Azx
UCL =
x 10.55
0.58
= 18*
119
=24.
10.55
0.58 x
18
-

LCL x =

11.851
=

Page 2 of 2
 O650: Operations Management / Summer 2023
HOMEWORK ASSIGNMENT #4

Submission:
• How: Only Through A2L (submission folder will be created)
• Due Date: Friday, June 16th at 10 PM
• Computations: Please note that you cannot use Excel for calculations (you can use it mainly
for plotting). You need to show your calculations manually (handwritten or typed).
However, if there are too many SIMILAR calculations (e.g., using the same formula), then
you can illustrate your calculations for at least two instances manually and do the rest using
Excel.

QUESTION 1 (15 Points)

Regional Supermarket is open 360 days per year. Daily use of cash register tape averages 10 rolls. Usage
appears normally distributed with a standard deviation of 2 rolls per day. The cost of ordering tape is $1
per order, and carrying costs are 40 cents per roll a year. Lead-time is three days.
a) Ignoring the demand uncertainty (i.e., looking only at average values), find the economic order
quantity (EOQ) and the reorder point (ROP).
b) Consider now the uncertainty. The order quantity remains the same. If the target is to have a 99%
annual service level, what should be the ROP?

QUESTION 2 (40 Points)

Consider the following information on an inventory management system:

Item Cost: $10
Order Cost: $250
Annual Holding Cost: 33% of item cost
Annual Demand: 25,750
Average Demand: 515 per week
Std. Dev. of Demand: 125 per week
Lead-time: 2 weeks
a) Ignoring the demand uncertainty (i.e., looking only at average values), find the optimal order
quantity and the reorder point. What is the annual inventory holding and ordering cost for this policy?
b) Consider now the uncertainty. The order quantity remains the same. If the target is to have a
98% annual service level, what should be the ROP? What is the safety stock? How much additional
inventory cost is incurred due to the safety stock?
c) If the ROP is 1178 units, what is the corresponding annual service level that the firm can
provide?

Page 1 of 2
 QUESTION 3 (25 Points)

CU, Inc. (CUI) produces copper contacts that it uses in switches and relays. CUI needs to determine the
order quantity to meet the annual demand at the lowest cost. The price of copper depends on the quantity
ordered. Here are price-break data and other information for the problem:
Price of copper:
$0.82 per pound up to 2,499 pounds
$0.81 per pound for orders between 2,500 and 4,999 pounds
$0.80 per pound for orders of 5,000 pounds or more
Annual demand: 50,000 pounds per year
Holding cost: 20% per unit per year of the price of the copper
Ordering cost: $30 per order

QUESTION 4 (20 Points)

Consider the following information on inventory items for a particular department:

Item Annual Demand Unit Cost
1 2 100 $20.00
2 400 $7.00
3 500 $175.00
4 1 200 $45.00
5 750 $1.50
6 800 $250
7 300 $15.00
8 1 650 $5.00
9 500 $20.50
10 850 $4.50
Perform ABC analysis on the above data and interpret the results.

Q-Range
Cost
Holding
EOS

Page 2 of 2
 D 50,000
=

S
=

$30

/ 12500
4999/52007
-

2499
Quantity Range
1.081

In
0.82 0.80
Discount price

Holding Cost. (H 0.2p)

=

0.164 I I 0.160

woIrani
Eog:

/ Rejected I Accepted
Range)

I
Swillin

Toba G8
=oe,00
exo-
I p+

=
350.71

+ 4100
41701.42
=
350.71
+

↳accos e ⑩ =299.94 400.00

+
10000
+

smallery +c-hence red to

produce 500l units