3 4 5 M&L. Manufacturing CASE M&L Manufacturing makes various components for printers and plans; and third, the other product has experienced periodic out- copiers. In addition to supplying these items to a major manufac- Of-stock instances. turer, the company distributes these and similar items to office The manager has compiled data on product demand for the supply stores and computer stores as replacement parts for two products from order records for the previous 14 weeks. These printers and desktop copiers. In all, the company makes about are shown in the following table. 20 different items. The two markets (the major manufacturer Week Product 1 Product 2 and the replacement market) require somewhat different han- 1 50 40 dling. For example, replacement products must be packaged 2 individually whereas products are shipped in bulk to the major manufacturer. The company does not use forecasts for production planning. Instead, the operations manager decides which items to produce 6 and the batch size, based on orders and the amounts in inventory. The products that have the fewest amounts in inventory get the highest priority. Demand is uneven, and the company has experi- 10 82 enced being overstocked on some items and out of others. Being understocked has occasionally created tensions with the manag- ers of retail outlets. Another problem is that prices of raw mate- rials have been creeping up, although the operations manager 96 thinks that this might be a temporary condition. "Unusual order due to flooding of customer's warehouse. Because of competitive pressures and falling profits, the man- ager has decided to undertake a number of changes. One change Questions is to introduce more formal forecasting procedures in order to 1. What are some of the potential benefits of a more formalized improve production planning and inventory management. approach to forecasting? With that in mind, the manager wants to begin forecasting for 2. Prepare a weekly forecast for the next four weeks for each prod- two products. These products are important for several reasons. uct. Briefly explain why you chose the methods you used. (Hint: First, they account for a disproportionately large share of the For product 2, a simple approach, possibly some sort of naive/ company's profits. Second, the manager believes that one of these intuitive approach, would be preferable to a technical approach products will become increasingly important to future growth in view of the manager's disdain of more technical methods.) 54 57 60 64 67 90* 76 79 7 8 9 38 41 46 42 41 41 47 42 43 42 49 43 44 | 11 12 13 14 85 87 92