Essay on 9 3 13

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Question
Situation
You are a manager at a medium sized manufacturing operation that sells a customized product directly to the consumers and the data pattern is linear but it can have the occasion randomness. The causes of this randomness are never apparent until after the event.
As manager, you are to complete a corporate forecast for this expensive and customized product that trends generally with the current economic situation.
Requirement 1
Complete the corporate forecast for this product using the data below to complete a 3 and 5 year weighted averages for the next year. For the judgmental forecasting component use the current economic situation.
Time Period
1
2
3
4
5
6
7

Historical Demand
456
399
712
498
487
567
450

Questions
What method is best here? Moving Average or Exponential Smoothing?
What is weighted average?
What is judgmental forecasting and how does it apply here?
The plant is using the chase production option and the ATO process design. The BOM is illustrated below. Requirement 2
Select the better forecasting model and support your answer. From your answer, explode the above
BOM for each item to determine the requirements of each item based on the Gross Requirement of
200 units for Item ‘A’; the parent item.
Requirement 3
The factory works on a process layout but the order lot sizing is open for determination. Determine the optimal method for lot sizing.
Questions:
What is BOM?
What is 2 to 1? 1 to 1?

Answer
Requirement 1
Using Weighted Moving averages 3 year weighted average = (1 × 487 + 2 × 567 + 3 × 450)/ (1 + 2 + 3) = 495.17 units
5 year weighted average = (1 × 712 + 2 × 498 + 3 × 487 + 4 × 567 + 5 × 450)/ (1 + 2 + 3 + 4 + 5) =
512.47 units

Questions
Moving average as under Exponential Smoothening only the most recent year’s data would be used which means 3 or 5 year weightage can NOT be used.

Weighted average is giving different weights to each observation and then computing an average using the sum of the weights as the denominator.
Judgemental forecasting is using instincts to forecast – here, since current economic situation is the judgemental component, we have given the highest weightage to the most recent year’s demand.

Requirement 2

The better forecasting method would be the 3 year

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