LONG-RANGE PLANNING CASE STUDY

After reviewing the long-range planning demonstration video (posted on Canvas) and looking over the slides, complete the following case. Transfer your answers to the Canvas quiz. It is listed as Assignment Capacity and Demand Planning.

You have been hired as a demand planning intern for Hawaiian Island Creations (HIC). They want you to develop a forecast for their HIC Papanui style of sunglasses. The goal is to determine how many pair they will produce to meet retailer demand in July 2021. During your first meeting, you were handed some data to work with and the product team talked about the companys upcoming promotional blitz to support Summer Break 21 in major vacation destinations.

Month	Production Output	Forecast	Demand
January 2021	3,500	4,000	3,300
February 2021	4,200	4,200	3,900
March 2021	4,600	4,500	4,500
April 2021	5,500	4,800	4,600
May 2021	6,100	5,000	5,900
June 2021	6,500	5,300	6,400
Other useful information about the company: Internal production capacity = 7,500 units per month Historical forecasting error = 300 units per month

Evaluate the capacity of HICs internal production capacity to serve demand.

Calculate capacity utilization for June 2021:

Based on HIC's available resources, did they have enough internal production capacity to serve demand in June 2021?

Calculate the demand forecast for July 2021 using the methods listed below. Work with the data provided in the table on the previous page.

Three-Month Simple Moving Average

Three-Month Weighted Moving Average

Weight factors t 1 = .50 t 2 = .40 t 3 = .10

Exponential Smoothing

Alpha smoothing constant = .8

Which method do you recommend that the company use when forecasting July 2021 demand? Explain why you selected this method.

Evaluate the companys forecast accuracy over the last three months.

Mean Absolute Deviation

MONTH	DEMAND	FORECAST	DIFFERENCE	ABSOLUTE DIFFERENCE
Apr-21	4,800	4,600	-200	200
May-21	5,000	5,900	900	900
Jun-21	5,300	6,400	1,100	1,100

Based on their historical forecasting error, how well is HIC doing in terms of forecast accuracy?