Individual Assignment 1

1. Monthly demand over the past 10 months is given below.

a. Graph the demand.

b. What is your best guess for the demand for month 11?

c. Using a three-month moving average, calculate the forecasts for months 4, 5, 6, 7, 8, 9, 10, and 11.

d. Using exponential smoothing, calculate the forecasts for the same months as in (c). The old average for month 3 was 96 and a = 0.2. What is the difference between the two forecasts for month 11?

e. Calculate the forecast errors for both methods. Do you think there is any bias in either method?

f. Based on the mean absolute deviation (MAD), which method do you think is more accurate?

Month 1 2 3 4 5 6 7 8 9 10

Actual Demand 102 91 95 105 94 100 106 95 105 98

2. Average demand for each month is given below.

a. Calculate the seasonal indices for each month.

b. If the annual forecast for the following year is 2000 units, what is the expected monthly demand?

c. If the actual demand for April was 1440 units and the seasonal index was 2.5, what would be the deseasonalized April demand?

Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Average Demand 30 50 85 110 125 245 255 135 100 90 50 30

3. The table below shows the aggregate sales forecasts for a product family for the year along with the number of working days per month. The forecasts are shown in dollar amounts ($ million). Furthermore, the following assumptions are made:

? Average sales value per unit is $30.

? Number of units produced per employee per day is 8.

? Hiring cost per employee is $200.

? Firing cost per employee is $500.

? Inventory carrying cost per unit per month is 2%.

? Beginning and ending inventories are 115,000 units.

? Beginning labor force is 1,437 persons.

Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Forecast (in millions $) 7.6 8.4 10.2 9 11.8 7 8.6 12.6 14.4 12.8 15.8 11.8

Working Days/Month 20 21 23 20 22 22 10 23 20 22 20 20

a. Use a time-phased plan in tabular display to show the forecast in units (1,000 units), the projected number of employees per month, the projected inventory per month in 1,000 units, the projected value of inventory in 1,000 $, and the days of supply per month when a chase strategy is used.

b. Repeat (a) with a level strategy.

c. Compare the total cost of the chase strategy versus the level strategy.

d. Design a hybrid strategy that will cost less than either the chase strategy or the level strategy.

4. The Acme Water Pump Company has a problem. The pumps are fairly expensive to make and store, so the company tends to keep the inventory low. At the same time, it is important to respond to demand quickly, since a customer who wants a water pump is very likely to get one from a competitor if Acme doesn’t have one available immediately. Acme’s current policy to produce pumps is to produce 100 per week, which is the average demand. Even this is a problem, as the production manager has pointed out, since the equipment is also used for other products and the lot size of 300 would be much more efficient. He said he is currently set up for water pump production for the next week and states that he has capacity available to produce 300 at a time next week. The following lists the forecasts and actual customer orders for the next 12 weeks:

Week 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 90 120 110 80 85 95 100 110 90 90 100 110

Customer Orders 105 97 93 72 98 72 53 21 17 6 2 5

The president of Acme has said that he wants to consider using a formal MPS with ATP logic to try to meet demand more effectively without a large impact on inventory. Acme has decided to use a demand time fence at the end of week 3 and has also found out that its current inventory is 25 units. Assume Acme will use the MPS lot size of 300 and that it will produce the first of those lots in week 1.

a. Develop a master schedule using the information above.

b. A customer has just requested a major order of 45 pumps for delivery in week 5. What would you tell the customer about having such an order? What if the new customer order is 100 instead of 45?

5. Given the following product tree, determine the gross and net quantities for each part. There is a requirement for 100 As in week 4 and 50 Bs is week 5. There is a scheduled receipt of 100 Cs in week 2. Quantities required of each and the lead times in weeks are shown in parentheses. For example, C(2,1) means you need two units of C to make up 1 unit of the parent item, and C has a lead time of 1 week. Finally, the lot sizes of all components are as required, with the exception of part E which has a lot size of 500.