krm8_ism_ch13 - Chapter 13 Forecasting DISCUSSION QUESTIONS...

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Unformatted text preview: Chapter 13 Forecasting DISCUSSION QUESTIONS 1. a. There is no trend in the data. Exponential smoothing or simple moving average would be appropriate for estimating the average. b. The primary external factors that can be forecasted three days in advance and can appreciably affect air quality are wind velocity and temperature inversions. c. Weather conditions cannot be forecast two summers in advance. Medium-term causal factors affecting air quality are population, regulations and policies affecting wood burning, mass transit, use of sand and salt on roads, relocation of the airport, and scheduling of major tourism events such as parades, car races, and stock shows. d. In the area of technological forecasting, qualitative methods of forecasting are best. One such approach is the Delphi method, whereby the consensus of a panel of experts is sought. Here we would survey experts in the fields of electric-powered vehicles, coal-fired combustion for electric utilities, and development of alternatives to sand and salt on roads. We hope to determine whether to expect any technological breakthroughs sufficient to affect air quality within the next 10 years. 2. Whats Happening? Our objective in writing this discussion question is to ensure students recognize the difference between sales and demand. Demand forecasting techniques require demand data. Michael is making the common mistake of using sales data as the basis for demand forecasts. Sales are generally equal to the lesser of demand or inventory. Say that inventory matches average demand at a particular location and is 100 newspapers. However, for the current edition, demand is less than average, say 90. Michael enters sales (which happens to be equal to demand in this period) into the forecasting system, resulting in an inventory reduction at that location for the next edition. Now suppose that demand for the next edition is 110. But because inventory has been reduced to 90, only 90 newspapers will be sold. Michael would then enter sales (which happens to be equal to inventory, not demand) into the forecasting system. This approach ratchets downward and tends to starve the distribution system. Because the publication is not reliably available, some customers eventually stop looking for Whats Happening? and demand truly declines. It is important that data used for demand forecasting are demand data, not sales data. 90 l PART 3 l Managing Value Chains PROBLEMS 1. Printer rentals a. The forecast for week 11 is 29 rentals. Forecast for Following Week Forecast Calculated A t Week ( F t + 1 ) 5 23 24 32 26 31 5 + + + + = 27.2 or 27 6 24 32 26 31 28 5 + + + + = 28.2 or 28 7 32 26 31 28 32 5 + + + + = 29.8 or 30 8 26 31 28 32 35 5 + + + + = 30.4 or 30 9 31 28 32 35 26 5 + + + + = 30.4 or 30 10 28 32 35 26 24 5 + + + + = 29.0 or 29 b. The Mean Absolute Deviation is 4 rentals....
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krm8_ism_ch13 - Chapter 13 Forecasting DISCUSSION QUESTIONS...

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