Chapter 11 Problem Solutions Fall 2011

# Chapter 11 Problem Solutions Fall 2011 - Chapter 11 Demand...

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Chapter 11 - Demand Management and Forecasting 11-1 CHAPTER 11 DEMAND MANAGEMENT AND FORECASTING Review and Discussion Questions 1. Examine Exhibit 11.3 and suggest which model you might use for (1) bathing suit demand, (2) demand for new houses, (3) electrical power usage, (4) new plant expansion plans. While any of the models in Exhibit 11.3 can potentially be used to forecast any of the items, the following models are generally appropriate: (1) Bathing suit demand could be forecasted using exponential smoothing. The time horizon is short, model complexity and cost is low, model accuracy is fair and data requirements are very low. (2) Demand for new houses can be forecasted using linear regression. The time horizons are long, model complexity is medi- um high, model accuracy is medium high and data requirements are high. (3) Causal regres- sion models might be used to forecast electrical power usage. The time horizon is long, mod- el complexity is fairly high, model accuracy is high and data requirements are high. (4) New plant expansion plans can be forecast using qualitative forecasting techniques. This takes in- to account nonquantifible issues when planning plant expansion. 2. What is the logic in the least squares methods of linear regression analysis? The least squares method tries to fit the line to the data that minimizes the sum of the squares of the vertical distance between each data point and its corresponding point on the line. 3. Explain the procedure to create a forecast using the decomposition methods of least squares regression. Decomposition of a time series means finding the series’ basic components of trend, season- ality, and cyclical. The process is: 1. Decompose the time series into its components a. Find seasonal components b. Deseasonalize the demand c. Find trend component 2. Forecast future values of each component. a. Project trend component into the future b. Multiply trend component by seasonal component c. 4. Give some very simple rules you might use to manage demand for a firm’s product. (An ex- ample is ―limited to stock on hand.‖) Demand management can be in terms of: order control—―limited to stock on hand,‖ lead time—―allow six weeks for delivery,‖ need—―supply the parts to inoperative units first,‖ time open—―close up early every day,‖ or ―closed on Saturdays,‖ plus others as mentioned in the text such as price cuts, incentives, promotions, etc. 5. What strategies are used by supermarkets, airlines, hospitals, banks, and cereal manufacturers to influence demand?

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Chapter 11 - Demand Management and Forecasting 11-2 Supermarkets—several sales items, free giveaway items (such as a pound of butter or a loaf of bread), an occasional ―midnight madness‖ sale where the store is open late or even all night. Airlines—excursion rates, age rates (senior citizens, children, youth fares), charter flights,
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## This note was uploaded on 10/10/2011 for the course BUS M 361 taught by Professor Cynthiawallin during the Fall '10 term at BYU.

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Chapter 11 Problem Solutions Fall 2011 - Chapter 11 Demand...

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