Month Year Demand (lbs)

Jan 2012 584

Feb 2012 552
Mar 2012 544
Apr 2012 576
May 2012 585
Jun 2012 784
Jul 2012 1026
Aug 2012 1098
Sep 2012 666
Oct 2012 504
Nov 2012 576
Dec 2012 1224
Jan 2013 720
Feb 2013 729
Mar 2013 747
Apr 2013 621
May 2013 819
Jun 2013 1260
Jul 2013 1368
Aug 2013 1530
Sep 2013 873
Oct 2013 976
Nov 2013 624
Dec 2013 1416
Jan 2014 855
Feb 2014 528
Mar 2014 729
Apr 2014 800
May 2014 744
Jun 2014 928
Jul 2014 1560
Aug 2014 1746
Sep 2014 909
Oct 2014 1773
Nov 2014 2000
Dec 2014 1512

MINIMUM DEMAND 504

MAXIMUM DEMAND 2000
 Demand (lbs)
2200

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1000

800

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400

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0
n ar ay l p v n ar ay l p v
Ja M M Ju Se No Ja M M Ju Se No
 Demand (lbs)

n ar ay l p v n ar ay l p v
Ja M M Ju Se No Ja M M Ju Se No
QUESTION NO.1, PART A
ANSWER: A-Yes, there appears to be a POSITIVE trend, because, there seems to be a steady increase i

Demand (lbs)
2200

2000

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1600

1400

1200

1000

800

600

400

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0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May J

QUESTION NO.1, PART B

C-Yes, there appears to be some sort of seasonality. Based on the graph above, it appears that there is so
ANSWER:
increased consumption of palm oil

QUESTION NO.1, PART C

FORECAST FOR DEMAND IN JANUARY 2015

NAÏVE MODEL Demand for December 2014

Demand (lbs) 1512

CUMULATIVE MODEL Average of all previous demands Month Year

Jan 2012
Cumulative demand (lbs) 957.94 Feb 2012
Mar 2012
12 PERIOD MOVING Average of 12 time periods (time period Apr 2012
AVERAGE chosen: months) May 2012
Jun 2012
Average demand (lbs) 1173.67 Jul 2012
Aug 2012
Sep 2012
Oct 2012
 Nov 2012
Dec 2012
Jan 2013
Feb 2013
Mar 2013
Apr 2013
May 2013
Jun 2013
Jul 2013
Aug 2013
Sep 2013
Oct 2013
Nov 2013
Dec 2013
Jan 2014
Feb 2014
Mar 2014
Apr 2014
May 2014
Jun 2014
Jul 2014
Aug 2014
Sep 2014
Oct 2014
Nov 2014
Dec 2014

QUESTION NO.1, PART D

CALCULATING ROOT MEAN SQUARE ERROR

CUMULATIVE MODEL
ROOT MEAN SQUARE ERROR 419.89

12 PERIOD MOVING AVERAGE

ROOT MEAN SQUARE ERROR 423.33

QUESTION NO.1, PART E

ANSWER: D- None of these models are appropriate
JUSTIFICATION:
Based on the analysis of the data, there is some seasonality, but generally it’s a pattern less data. Based on
seasonality index calculation might be more appropriate
re seems to be a steady increase in demand from 2012, and also the minimum level till which the demand drops is also increas

Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

h above, it appears that there is some sort of seasonality in the demand patterns, with spikes and dips in demands observed in J

CUMULATIVE MODEL 12 PERIOD MOVING AVERAGE (L

PERIODS SELEC
Demand (lbs) FORECAST ERROR ERROR ABSOLUTE SQUARE ERROR FORECAST ERROR
584
552 584.00 -32.00 32.00 1024.00
544 568.00 -24.00 24.00 576.00
576 560.00 16.00 16.00 256.00
585 564.00 21.00 21.00 441.00
784 568.20 215.80 215.80 46569.64
1026 604.17 421.83 421.83 177943.36
1098 664.43 433.57 433.57 187984.18
666 718.63 -52.63 52.63 2769.39
504 712.78 -208.78 208.78 43588.16
 576 691.90 -115.90 115.90 13432.81
1224 681.36 542.64 542.64 294454.22
720 726.58 -6.58 6.58 43.34 726.58 -6.58
729 726.08 2.92 2.92 8.54 737.92 -8.92
747 726.29 20.71 20.71 429.08 752.67 -5.67
621 727.67 -106.67 106.67 11377.78 769.58 -148.58
819 721.00 98.00 98.00 9604.00 773.33 45.67
1260 726.76 533.24 533.24 284339.88 792.83 467.17
1368 756.39 611.61 611.61 374068.15 832.50 535.50
1530 788.58 741.42 741.42 549705.18 861.00 669.00
873 825.65 47.35 47.35 2242.02 897.00 -24.00
976 827.90 148.10 148.10 21932.20 914.25 61.75
624 834.64 -210.64 210.64 44367.68 953.58 -329.58
1416 825.48 590.52 590.52 348715.92 957.58 458.42
855 850.08 4.92 4.92 24.17 973.58 -118.58
528 850.28 -322.28 322.28 103864.40 984.83 -456.83
729 837.88 -108.88 108.88 11855.86 968.08 -239.08
800 833.85 -33.85 33.85 1145.95 966.58 -166.58
744 832.64 -88.64 88.64 7857.56 981.50 -237.50
928 829.59 98.41 98.41 9685.27 975.25 -47.25
1560 832.87 727.13 727.13 528722.88 947.58 612.42
1746 856.32 889.68 889.68 791525.91 963.58 782.42
909 884.13 24.88 24.88 618.77 981.58 -72.58
1773 884.88 888.12 888.12 788759.29 984.58 788.42
2000 911.00 1089.00 1089.00 1185921.00 1051.00 949.00
1512 942.11 569.89 569.89 324769.73 1165.67 346.33

’s a pattern less data. Based on that assumption an exponential smoothing method or

mand drops is also increasing from previous years

s in demands observed in January and July, indicating an

IOD MOVING AVERAGE (LAST TWO 12 MONTH

PERIODS SELECTED)
ERROR ABSOLUTE SQUARE ERROR
 6.58 43.34
8.92 79.51
5.67 32.11
148.58 22077.01
45.67 2085.44
467.17 218244.69
535.50 286760.25
669.00 447561.00
24.00 576.00
61.75 3813.06
329.58 108625.17
458.42 210145.84
118.58 14062.01
456.83 208696.69
239.08 57160.84
166.58 27750.01
237.50 56406.25
47.25 2232.56
612.42 375054.17
782.42 612175.84
72.58 5268.34
788.42 621600.84
949.00 900601.00
346.33 119946.78
DATA
D 14 wheels per week
D 728 wheels per year
S 90 $ per order
C 12.5$ per wheel
I 20%
IC 2.5

PART A

EOQ= √((2∗𝐷∗𝑆))/(𝐼𝐶)
EOQ= √((2∗728∗90))/(2.5)
EOQ= 228.95
EOQ= 229 wheels per order

PART B

D= 728
EOQ= 229
No.of orders per year= 3.2
After how many weeks to place an
order/No.of weeks on average on
shelf=

16

PART C

Opportunity Cost =10*0.15*52

Opportunity Cost 78
New IC =78+2.5
New IC 80.5
EOQ= √((2∗𝐷∗𝑆))/(𝐼𝐶)
EOQ= √((2∗728∗90))/(80.5)
EOQ= 40.35
EOQ= 40 wheels per order

PART D
Available shelf space= 3 square feet
1 wheel occupies= 0.15 square feet
No.of wheels which can be ordered= 3/0.15
No.of wheels which can be ordered= 20
DATA
R= 10 days
L= 3 days
L+R= 13 days
D= 20 bottles per day
σ= 5 units per day
Inventory Stock= 200 bottles
CSL= 95%
z= 1.65

PART A
Average cycle stock= =(D*R)/2
Average cycle stock= 100
Average cycle stock= 100 bottles

PART B
Coverage period (L+R)= 13
σ(L+R)= =5*√13
σ(L+R)= 18
Safety Stock= z*σ(L+R)
Safety Stock= 30
Safety Stock= 30 units

PART C
B. Your uncle has too much inventory
D. Your uncle will probably has a cycle service level above 95%
Justification: The safety stock that should be kept is 30 bottles when the average cycle stock calls for 100
bottles to be kept with a standard deviation of 5 bottles per day. His inventory level is 130 bottles per cycle
stock, thats why his CSL well above 95%, as his inventory stock is kept at 200 bottles

PART D
Inventory Stock= 200 bottles
Average Cycle stock= 100 bottles
Safety Stock= 100 bottles
z= =safety stock/σ(L+R)
z= 5.5556
Implied CSL= Well above 100% at z=5.5556, so the inventory level being carried is much too high

PART E
R= 5 days
L= 3 days
Coverage period (L+R)= 8 days
CSL= 95%
z= 1.65
Cycle stock= =D*R
Average cycle stock= 100
Average cycle stock= 100 bottles

σ(L+R)= =5*√8
σ(L+R)= 14
Safety Stock= z*σ(L+R)
Safety Stock= 23
Safety Stock= 23 units
 k calls for 100
bottles per cycle

is much too high

Store ID x (Hrs.) Revenue in 1000 USD City
1 40 762 A
2 44 986 A
3 48 1,088 A
4 54 1,045 A
5 60 1,070 A
6 70 1,199 A
7 72 995 A
8 100 1,210 A
9 160 1,579 A
10 168 1,847 A
11 40 793 B
12 44 900 B
13 48 1,108 B
14 54 1,114 B
15 60 969 B
16 70 1,052 B
17 72 1,077 B
18 100 1,625 B
19 160 2,083 B
20 168 1,794 B
SUMMARY OUTPUT

Regression Statistics
Multiple R 0.9433765007
R Square 0.889959222
Adjusted R Square 0.8762041248
Standard Error 110.68655038
Observations 10

ANOVA
df SS MS F Significance F
Regression 1 792676.8 792676.8 64.70032 4.199E-05
Residual 8 98012.1 12251.51
Total 9 890688.9

CoefficientsStandard Error t Stat P-value Lower 95%Upper 95%Lower 95.0%

Intercept 660.20306529 73.28494 9.008714 1.84E-05 491.2077 829.1984 491.2077
x (Hrs.) 6.3467761607 0.789042 8.043651 4.199E-05 4.527243 8.16631 4.527243
Upper 95.0%
829.1984
8.16631
PART A
Beta Intercept(β0) 660.20
Beta Intercept(β1) 6.35

PART B
Adjusted R2= 0.8762

An adjusted R2 value of 0.8762 is considered a good model for forecasting sales as it shows that this
model explains 87.62% of the variability in data
 SUMMARY OUTPUT

Regression Statistics
Multiple R 0.9433765007
R Square 0.889959222
Adjusted R Square 0.8762041248
Standard Error 110.68655038
Observations 10

ANOVA
df SS MS
Regression 1 792676.80052 792676.80052
Residual 8 98012.0994796 12251.512435
Total 9 890688.9

Coefficients Standard Error t Stat

Intercept 660.20306529 73.2849433709 9.00871359
x (Hrs.) 6.3467761607 0.78904170852 8.0436510417

as it shows that this

 F Significance F
64.700322081 4.1989938E-05

P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%

1.83998E-05 491.20768283 829.19844775 491.20768283 829.19844775
4.198994E-05 4.527242718 8.1663096033 4.527242718 8.1663096033