Question: A company is using exponential smoothing when forecasting the demand for a special product. The forecast is updated once every week. The smoothing constant for
A company is using exponential smoothing when forecasting the demand for a special product. The forecast is updated once every week. The smoothing constant for the demand forecast is and for MAD a smoothing constant equal to is used. Last week the forecast for the demand and MAD were and respectively. The observed demand during this week is The supplier lead time is weeks. Assume that forecast errors during different weeks are independent of each other.
With the above information we get that
The updated demand forcast for newt week I units.
The updated forcast for MAD is
and the forecast for the total demand during the next weeks are
Assume that the inventory for this special product is controlled by an RQ policy with continuous review. Assume that Q and that the demand during the lead time follows a normal distribution. Determine the lowest value of safety stock, SS such that both S and S are at least
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