Final PDF to printer
124
Chapter Three Forecasting
14. Contrast the reactive and proactive approaches to forecasting. Give several examples of types of
organizations or situations in which each type is used.
15. Explain how flexibility in production systems relates to the forecast horizon and forecast accuracy.
16. How is forecasting in the context of a supply chain different from forecasting for just a single
organization? List possible supply chain benefits and discuss potential difficulties in doing supply
chain forecasting.
17. Which type of forecasting approach, qualitative or quantitative, is better?
18. Suppose a software producer is about to release a new version of its popular software. What information do you think it would take into account in forecasting initial sales?
19. Choose the type of forecasting technique (survey, Delphi, averaging, seasonal, naive, trend, or
associative) that would be most appropriate for predicting
a. Demand for Mother’s Day greeting cards.
b. Popularity of a new television series.
c. Demand for vacations on the moon.
d. The impact a price increase of 10 percent would have on sales of orange marmalade.
e. Demand for toothpaste in a particular supermarket.
TAKING STOCK
1. Explain the trade-off between responsiveness and stability in a forecasting system that uses
time-series data.
2. Who needs to be involved in preparing forecasts?
3. How has technology had an impact on forecasting?
CRITICAL
THINKING
EXERCISES
1. It has been said that forecasting using exponential smoothing is like driving a car by looking in the
rear-view mirror. What are the conditions that would have to exist for driving a car that are analogous to the assumptions made when using exponential smoothing?
2. What capability would an organization have to have to not need forecasts?
3. When a new business is started, or a patent idea needs funding, venture capitalists or investment
bankers will want to see a business plan that includes forecast information related to a profit and
loss statement. What type of forecasting information do you suppose would be required?
4. Discuss how you would manage a poor forecast.
5. 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 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 forecast of his next quarter
sales to his manager. What are the pros and cons of doing that?
6. Give three examples of unethical conduct involving forecasting and the ethical principle each violates.
PROBLEMS
1. A commercial bakery has recorded sales (in dozens) for three products, as shown below:
Day
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
ste24102_ch03_074-133.indd 124
Blueberry
Muffins
Cinnamon
Buns
Cupcakes
30
34
32
34
35
30
34
36
29
31
35
31
37
34
33
18
17
19
19
22
23
23
25
24
26
27
28
29
31
33
45
26
27
23
22
48
29
20
14
18
47
26
27
24
22
11/10/13 5:11 PM
Final PDF to printer
Chapter Three
Forecasting
125
a. Predict orders for the following day for each of the products using an appropriate naive method.
Hint: Plot each data set.
b. What should the use of sales data instead of demand imply?
2. National Scan, Inc., sells radio frequency inventory tags. Monthly sales for a seven-month period
were as follows:
Month
Sales
(000 units)
Feb.
Mar.
Apr.
May
Jun.
Jul.
Aug.
19
18
15
20
18
22
20
a. Plot the monthly data on a sheet of graph paper.
b. Forecast September sales volume using each of the following:
(1) The naive approach.
(2) A five month moving average.
(3) A weighted average using .60 for August, .30 for July, and .10 for June.
(4) Exponential smoothing with a smoothing constant equal to .20, assuming a a March
forecast of 19(000).
(5) A linear trend equation.
c. Which method seems least appropriate? Why? (Hint: Refer to your plot from part a.)
d. What does use of the term sales rather than demand presume?
3. A dry cleaner uses exponential smoothing to forecast equipment usage at its main plant. August
usage was forecasted to be 88 percent of capacity; actual usage was 89.6 percent of capacity. A
smoothing constant of .1 is used.
a. Prepare a forecast for September.
b. Assuming actual September usage of 92 percent, prepare a forecast for October usage.
4. An electrical contractor’s records during the last five weeks indicate the number of job requests:
Week:
Requests:
1
20
2
22
3
18
4
21
5
22
Predict the number of requests for week 6 using each of these methods:
a. Naive.
b. A four-period moving average.
c. Exponential smoothing with ! " .30. Use 20 for week 2 forecast.
ste24102_ch03_074-133.indd 125
11/10/13 5:11 PM