Question: Develop a forecast for FY2021 using the two forecasting methods currently employed by the company.Comment on which of the forecasts is likely to be more
Develop a forecast for FY2021 using the two forecasting methods currently employed by the company.Comment on which of the forecasts is likely to be more appropriate to support decisions based on your assessment of forecast accuracy from Q1.Are there any other considerations that you would recommend to Throx.
Product Orders (Demand) Information
The company provides you with the following information for the past two fiscal years:
Demand Characteristic
2019
2020
Annual Demand, sets
24,500
26,875
Average Weekly Demand
471
517
Variance of weekly Demand
118
129
Product Forecasting Information
Throx uses two main forecasting methods based on annual data to predict orders for the following year, a weighted moving average and exponential smoothing.They provide you with the following information about forecasts for FY 2017 through FY2020:
Actual Demand
Weighted Moving Average Fcst
Exponential Forecast
2017
19,000
14,500
15,000
2018
21,500
17,750
18,600
2019
24,500
20,750
21,210
2020
26,875
23,600
24,500
Weighted Moving Average uses Wt= 0.7 and Wt-1=0.3.
Exponential Smoothing uses = 0.9.
Inventory Management Information
The initial inventory for all sock styles combined at the beginning of FY 2021 is 2,250 units.You also have information on current costs, which includes:
Order cost toThroxfor an order placed with its current supplier, $/order = S = $250
Holding cost per set perper year= H = $1.50
The company currently pays $6.50 for each set of socks. = P
The company uses a continuous review replenishment policy, and has IT systems in place that allow constant monitoring of key information.Last year, the company used an ROP under this policy of 1,800 units for all sock styles and an order quantity Q of 4,000 units for all sock styles.
Potential Alternatives to Current Supply Chain Management
The company has asked you to evaluate a number of alternatives to their current SCM practices, including at a minimum their choice of supplier, transportation modes, warehouse capacity, order quantities and safety stock.
Alternative Suppliers
The company has contacted potential alternative suppliers in China, who have offered the following information relative to the current supplier:
For the quality performance assessment of the suppliers, Throx would like you determine the Capability Index for each Supplier based on the following information.Target Sock Thickness: 6mm +/- 1mm
Alternative Transportation
An alternative to their current transportation approach available to Throx is shipment by UPS Express Air from Shanghai to Richmond, which averages 3.5 days.The comparison of costs is given as:
* No data are available about variation in transit times, so Throx assumes this is constant.
Similar to their decision about sourcing, Throx wants to use a single-sourcing strategy for transportation, so they want a recommendation about which mode would be best.
Alternative Warehouse Location
The company would also like to assess whether its current warehouse location is appropriate based on where customers are located.It provides you the following information about its key markets, and indicates that its orders in each market are roughly proportional to the total population.
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