Operations Management
13th Edition
ISBN: 9781259667473
Author: William J Stevenson
Publisher: McGraw-Hill Education
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Chapter 3, Problem 5CTE
Omar has beard from some of his customers that they will probably cut back on order sizes in the next quarter. The company he works for has been reducing its sales force due to falling demand and he worries that he could be next if his sales begin to fall off. Believing that he may be able to convince his customers not to cut back on orders, he turns in an optimistic
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Omar has heard from some of his customers that they will probably cut back on order sizes in the next quarter. The company he works for has been reducing its salesforce due to falling demand, and he worries that he could be next if his sales begin to fall off. Believing that he may be able to convince his customers not to cut back on orders, he turns in an optimistic forecast of his next quarter sales to his manager. What are the pros and cons of doing that?
The options Outlook has for handling the seasonality of magazine are adding workers during the peak season, subcontracting out some of the work, building up inventory during the slow months, or building up a backlog of orders that will be delivered late to customers. To determine how to best use these options through an aggregate plan, Outlook`s vice president of Marketing starts with the first task-building a demand forecast. Although Outlook could attempt to forecast this demand itself, a much more accurate forecast comes from a collaborative process used by both Outlook and its retailers to produce the forecast shown in Table (a).
Outlook sells each book through retailers for Rs.40. The company has a starting inventory in January of 1000 books. At the beginning of January the company has a workforce of 80 employees. The company has a total of 20 working days in each month, and each employee earns Rs 4 per hour regular time. Each employee works eight hours per day on straight time…
The options Outlook has for handling the seasonality of magazine are adding workers during the peak season, subcontracting out some of the work, building up inventory during the slow months, or building up a backlog of orders that will be delivered late to customers. To determine how to best use these options through an aggregate plan, Outlook`s vice president of Marketing starts with the first task-building a demand forecast. Although Outlook could attempt to forecast this demand itself, a much more accurate forecast comes from a collaborative process used by both Outlook and its retailers to produce the forecast shown in Table (a).
Outlook sells each book through retailers for Rs.40. The company has a starting inventory in January of 1000 books. At the beginning of January the company has a workforce of 80 employees. The company has a total of 20 working days in each month, and each employee earns Rs 4 per hour regular time. Each employee works eight hours per day on straight time…
Chapter 3 Solutions
Operations Management
Ch. 3.15 - Prob. 1.1RQCh. 3.15 - Prob. 1.2RQCh. 3.15 - Prob. 1.3RQCh. 3 - What are the main advantage that quantitative...Ch. 3 - What are some of the consequences of poor...Ch. 3 - List the specific weaknesses of each of these...Ch. 3 - Forecasts are generally wrong a. Why are forecasts...Ch. 3 - What is the purpose of establishing control limits...Ch. 3 - What factors would you consider in deciding...Ch. 3 - Contrast the use of MAD and MSE in evaluating...
Ch. 3 - What advantages as a forecasting tool does...Ch. 3 - How does the number of periods in a moving average...Ch. 3 - What factors enter into the choice of a value for...Ch. 3 - Prob. 11DRQCh. 3 - Explain how using a centered moving average with a...Ch. 3 - Contrast the terms sales and demand.Ch. 3 - Contrast the reactive and proactive approaches to...Ch. 3 - Explain how flexibility in production systems...Ch. 3 - How is forecasting in the context of a supply...Ch. 3 - Which type of forecasting approach, qualitative or...Ch. 3 - Prob. 18DRQCh. 3 - Choose the type of forecasting technique (survey,...Ch. 3 - Explain the trade-off between responsiveness and...Ch. 3 - Who needs to be involved in preparing forecasts?Ch. 3 - How has technology had an impact on forecasting?Ch. 3 - It has been said that forecasting using...Ch. 3 - What capability would an organization have to have...Ch. 3 - When a new business is started, or a patent idea...Ch. 3 - Discuss how you would manage a poor forecast.Ch. 3 - Omar has beard from some of his customers that...Ch. 3 - Give three examples of unethical conduct involving...Ch. 3 - A commercial baker, has recorded sales (in dozens)...Ch. 3 - National Scan, Inc., sells radio frequency...Ch. 3 - A dry cleaner uses exponential smoothing to...Ch. 3 - An electrical contractors records during the last...Ch. 3 - A cosmetics manufacturer s marketing department...Ch. 3 - Prob. 6PCh. 3 - Freight car loadings ova a 12-year period at a...Ch. 3 - Air travel on Mountain Airline for the past 18...Ch. 3 - a. Obtain the linear trend equation for the...Ch. 3 - After plotting demand for four periods, an...Ch. 3 - A manager of a store that sells and installs spas...Ch. 3 - The following equation summarizes the trend...Ch. 3 - Compute seasonal relatives for this data the SA...Ch. 3 - A tourist center is open on weekends (Friday,...Ch. 3 - The manager of a fashionable restaurant open...Ch. 3 - Obtain estimates of daily relatives for the number...Ch. 3 - A pharmacist has been monitoring sales of 2...Ch. 3 - New car sales for a dealer in Cook County,...Ch. 3 - The following table shows a tool and die companys...Ch. 3 - An analyst must decide between two different...Ch. 3 - Two different forecasting techniques (F1 and F2)...Ch. 3 - Two independent methods of forecasting based on...Ch. 3 - Long-Life Insurance has developed a linear model...Ch. 3 - Timely Transport provides local delivery service...Ch. 3 - The manager of a seafood restaurant was asked to...Ch. 3 - The following data were collected during a study...Ch. 3 - Lovely Lawns Inc., intends to use sales of lawn...Ch. 3 - The manager of a travel agency has been using a...Ch. 3 - Refer to the data in problem 22 a. Compute a...Ch. 3 - The classified department of a monthly magazine...Ch. 3 - A textbook publishing company has compiled data on...Ch. 3 - A manager has just receded an valuation from an...Ch. 3 - A manager uses this equation to predict demand for...Ch. 3 - A manager uses a trend equation plus quarterly...Ch. 3 - ML MANUFACTURING ML Manufacturing makes various...Ch. 3 - ML MANUFACTURING ML Manufacturing makes various...Ch. 3 - HIGHLINE FINANCIAL SERVICES, LTD. Highline...
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- Scenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. Is Ben Gibson acting legally? Is he acting ethically? Why or why not?arrow_forwardScenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. As the Marketing Manager for Southeastern Corrugated, what would you do upon receiving the request for quotation from Coastal Products?arrow_forwardYou have been tasked with the development of an aggregate plan for the year ended 31 December 2022. Accordingly, you have developed monthly forecasts for a range of motorcycles as presented in Table 5.1, below. Table 5.1: The demand forecast developed for the year ended 31 December 2022. MONTH Jan-2022 Feb-2022 Mar-2022 Apr-2022 May-2022 Jun-2022 Jul-2022 Aug-2022 Sep-2022 Oct-2022 Nov-2022 Dec-2022 PRODUCTION DAYS DEMAND FORECAST 16 16 23 21 22 22 21 20 20 20 16 16 150 150 250 250 400 500 600 750 450 250 150 150 Compute and tabulate the daily demand for each month in the table below (round off to the nearest whole number).arrow_forward
- Exercise # 2 –Calculating MADt, Revised MADt,Error,and the Revised Error :Has the Forecast Improved ? How much has it improved in % terms ? Franklin Henry forecasts demand for an auditing and accounting services group, for an estate planning group ,and a business consulting group.His group forecasts for the preceding six-month(M) period, which were made six months prior to that time, are each based on a level, patternless projection.The following data table shows these forecasts(F) and the actual demand (AD) for each group : Estate Planning Auditing and Accounting Business Consulting (Client –days) (Client –days) (Client –days) M AD F M AD F M AD F 1 120 130 1 260 230 1 120 120 2 80 130…arrow_forwardWhat should be our forecast accuracy target if there is a high degree of volatility in customer orders and long lead times? We have a new chief sales officer who is proposing that we should forecast in dollars, not in units/cases. I have never heard of anyone forecasting in dollars. It is true that dollarized forecasts can help Sales in knowing precisely what sales target they should be hitting. But, is it the best practice?arrow_forwardWhat should be our forecast accuracy target if there is a high degree of volatility in customer orders and long lead times?arrow_forward
- A Dallas, TX-based manufacturer of small gasoline engines has developed monthly forecasts for a family of lawnmowers. Data for the 6-month period from January to June is presented in the table below. The firm would like to use an aggregate plan. MONTH Expected Demand Production Days Jan. 800 22 Feb. 700 18 Mar. 800 24 Apr. 1,200 25 May 1,600 26 June 1,900 26 One possible strategy for the manufacturer is to maintain a constant workforce throughout the 6-month period. The information below provides the cost information necessary for analyzing this alternative. Inventory carrying cost $3.00 Subcontracting cost per unit $15.00 Average pay rate $12.00 Daily pay rate = $96.00 Overtime pay rate $18.00 Labor-hours to produce a unit 2.2 Cost of increasing daily production rate (hiring and training) $200.00 Cost of decreasing daily production rate (layoffs) $350.00 The number of units produced per day = 45 and we have a constant workforce, no overtime or…arrow_forwardCongratulations, the design options for the two mobile phone lines have been specified. You will now have to predict the total demand for each product line. Your forecasting team members have come up with a consensus for what they believe demand will be for the mobile phone lines. However, the board of your company is interested in your personal estimates as well. The numbers you will forecast after entering the forecasting room will not affect your production schedule, but they will help you later as you determine where and how to source your products. Model A: Monthly Estimated Demand May–December in thousands per month Average:59Standard Dev:2 AndreiAyaLorenzoClaireByronRuthConsensus020406080 Model B: Monthly Estimated Demand May–December in thousands per month Average:29Standard Dev:6 AndreiAyaLorenzoClaireByronRuthConsensus020406080 Unit Data with Options as Chosen costs are an estimate from the lowest-cost contract manufacturer Model A Model B Unit Price…arrow_forwardSales for the past 12 months at computer success are given here: January 3,000 July 6,300 february 3,400 August 7,200 March 3,700 Sept 6,400 April 4,100 Oct 4,600 May 4,700 Nov 4,200 June 5,700 December 3,900 a. Use a 3-month moving average to forecast the sales for the months May through December b. Use a 4-month moving average to forecast the sales for the months May through December C. Compare the performance of the two methods by using the mean absolute deviation as the performance criterion. Which method would you recommend? d. Compare the performance of the two methods by using the mean absolute percent error as the performance criterion. Which method would you recommend? e. Compare the performance of the two methods by using the mean squared error as the performance criterion. Which method would you recommend?arrow_forward
- The following table shows the actual sales of upholstered chairs for a furniture manufacturer and the forecastsmade for each of the last 8 months. Calculate CFE, MSE, s, MAD, and MAPE for this product.arrow_forwardWhat are the advantages and disadvantages of aggregating demand from a forecasting view? Are there other things that should be considered when going from multiple DCs to a DC?arrow_forwardSuppose a four period weighted average is being used to forecast demand. Weights for the periods are: Wt-4 = 0.1 Wt-3 = 0.2 Wt-2 = 0.3 Wt-1 0.4 Demand observed in the previous four periods was: At-4 = 325 At-3 = 361 At-2 = 478 At-1 = 400 What will be the demand forecast for period t? (Keep one decimal place in your answer).arrow_forward
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