Suryapranata A.pdf - Forecasting Framework for Inventory...

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Forecasting Framework for Inventory and Sales of Short Life Span Products Master Thesis Graduate student: Astrid Suryapranata Graduation committee: Professor: Prof. dr. ir. M.P.C. Weijnen Supervisors: dr. ir. Zofia Verwater-Lukszo Scott W. Cunningham D.Phill Clive Marshman dr. ir. Ardjan Krijgsman Technology and Policy Analysis Delft University of Technology 2003
i Executive Summary Forecasting is used to predict or describe what will happen, and the use of such forecasts in planning would help in making a good decision about the most attractive alternatives for the company. The forecasting tasks is even more important in developing a new product since the actual sales performance of this new product has not been known, while many decisions should be made to manage the product into a desired growth. This situation is faced by Unilever as it has just started developing new products which have a short life span characteristic. This characteristic is a new experience for the company to cope with. The excess stock tolerance of this type of product is smaller than of the non-perishable products, while out of stock condition has never been an option in the company’s policy for any type of its product. This leads the company to consider having a ‘good’ forecasting. Therefore, this research is conducted as an attempt to seek what forecasting techniques are appropriate to support decisions making in the operational level of supply chain when dealing with short life span products to avoid undesired stock conditions. To answer this question, literature study of forecasting and information gathering about the current forecasting practices are done during the research. The literature study provides knowledge about the forecasting method ranges and their applications. Whilst, studying the current forecasting practices gives knowledge about what have been done in the company and the company’s expectations with respect to this matter. The company’s expectations are related to the general objectives of the forecasting process which is described through an objective tree approach and the solutions for the company’s specific forecasting problems which are identified through a system diagram and causal diagram approaches. The main general objective of the forecasting process is determined in the objective tree, which is to have a good forecasting. The next is to perform further decomposition of the main general objective into the sub objectives that contributing to it in order to determine the forecasting specification. This functional specification results in a fact that forecast accuracy is not the only important parameter. Practical factors are also expected to be considered in selecting the forecasting techniques, for examples the easiness of using the method and the easiness of understanding the model. It creates a possible trade off between forecast accuracy and ‘simplicity’ of the method/model.

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