Problem Set 1 Answer the three (3) questions on demand forecasting and customer relationship management. Based on the information shown below,...
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Problem Set 1

Answer the three (3) questions on demand forecasting and customer relationship

management.

1. Based on the information shown below, develop forecasts for April to October using:

(a) A 3-period weighted moving average model (w1 = 0.5, w2 = 0.3, and w3 = 0.2).

(b) An exponential smoothing model with α = 0.35. Assume the forecast for March was 950.

Month                              Actual Demand

Jan                                         1050

Feb                                         975

Mar                                        1000

Apr                                          870

May                                        970

Jun                                          1220

Jul                                           1170

Aug                                        1150

Sep                                         1235

Oct                                          1275

2. Based on the information shown below, calculate MAD, MSE and tracking signal.

 

   Week Actual Demand Forecast

1 750 770

2 690 730

3 820 710

4 850 790

5 870 840

6 780 850

7 915 890

8 950 920

 

3. For the information given, rank the customers in terms of customer lifetime value.

                       Avg. Annual Sales Avg.     Profit Margin     Expected Lifetime

Customer 1:                      $3,450             17 %                      8 years

Customer 2:                      $2,000             13 %                      6 years

Customer 3:                     $1,400              32 %                     10 years

Use a discount rate of 6 percent and treat the average sales figures as annuities. Should any of these customers be fired?

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