Question 1: Forecasting and Inventory management (40%) Electroducks is a major manufacturer of home appliances. At the beginning of 2021, they wanted to use the sales data of 2020 from their Scandinavian market to forecast future demand of their air conditioners. The sales data is given in the table below. This table is also given in worksheet "Assignment 1" of the attached Excel file. Period Sales January 2020 73 February 2020 150 March 2020 765 April 2020 May 2020 2970 June 2020 3704 July 2020 4130 August 2020 3903 September 2020 3001 October 2020 November 2020 964 December 2020 163 1820 1931 a) Make a 3 month moving average forecasting model. Use this model to make a forecast for January 2021 b) The analysts of Electroducks, have compared sales data of air-conditioners with the average temperature at the same periods in their Scandinavian market region. They believe there is a relationship between sales and temperature. Use the following average temperature data and make a causal model to forecast demand. This table is also given in worksheet "Assignment 1" of the attached Excel file. What is your forecast for January 2021, if the forecasted temperature for January 2021 is -2.5 C? Period Average temperature (C) January 2020 -2.8 February 2020 -24 March 2020 April 2020 5.9 May 2020 11.6 June 2020 15.3 July 2020 17.6 August 2020 16.5 September 2020 October 2020 6.6 November 2020 1.6 December 2020 -2.4 1 11.8 c) Compare the models in (a) and (b). Which one is more accurate? Why? a Electroducks purchases electromotors for their dishwashers from a supplier. Their requirement for such electromotors is quite stable and non-seasonal. They estimate they need on average 1500 electromotors per month. They also estimate the standard deviation of their monthly requirement to be 200 electromotors. According to a statistical analysis, the monthly requirement of electromotors has a normal distribution They purchase each electromotor for 80 Euros. Each time they order to the supplier, no matter how many electromotors they order, they have to pay 200 Euros for transportation and 16 euros for order processing. The interest rate is estimated to be 15% per year. The supplier delivers the electromotors, one month after ordering. This delivery time is fixed. Electroducks uses a continuous review system for inventory management and control of electromotors. d) What is their optimal order size? e) if they use the optimal order size, how many orders do they make per year? For a service level of 98%, how much safety stock must they keep? B) If they keep a safety stock as calculated in (f), how much is the inventory position at which they have to make an order? What is this inventory position called? h) If they keep a safety stock equivalent to 5 days of average demand (assume each month is 30 days), how much will be their safety stock? Will they have a higher service level compared to (h? Why? 0) if they use the optimal order size and the safety stock calculated in (h), how much is their annual inventory holding cost? Do not calculate in transit inventory cost. How many days is the inventory throughput time? 1) Electroducks are using a single sourcing strategy. In the RealGame the BioCounter Ltd could also use a multiple sourcing strategy. Give three arguments for why a multiple sourcing strategy could be advantageous for Electroducks? 3 Period Average temperature 3-month moving Air-conditioners sales (C) average forecast Causal forecast Electromotors Average monthly requirements 73 -2,8 150 -2,4 1500 765 Standard deviation of monthly requirements 1 1 5,9 1820 200 2970 11,6 Delivery time from supplier 3704 15,3 1 month January 2020 February 2020 March 2020 April 2020 May 2020 June 2020 July 2020 August 2020 September 2020 October 2020 November 2020 December 2020 4130 17,6 Purchasing price per electromotor 3903 16,5 80 Euros 3001 11,8 Transportation cost for each order 1931 6,6 200 Euros 964 Order processing cost for each order 1,6 -2,4 163 16 Euros Interest rate 15% per year a) Make a 3-month moving average forecasting model. Use this model to make a forecast for January 2021, 3-month moving Period Air-conditioners sales average forecast January 2020 73 February 2020 150 March 2020 765 April 2020 1820 May 2020 2970 June 2020 3704 July 2020 4130 August 2020 3903 3001 September 2020 October 2020 1931 964 November 2020 December 2020 163 Question 1: Forecasting and Inventory management (40%) Electroducks is a major manufacturer of home appliances. At the beginning of 2021, they wanted to use the sales data of 2020 from their Scandinavian market to forecast future demand of their air conditioners. The sales data is given in the table below. This table is also given in worksheet "Assignment 1" of the attached Excel file. Period Sales January 2020 73 February 2020 150 March 2020 765 April 2020 May 2020 2970 June 2020 3704 July 2020 4130 August 2020 3903 September 2020 3001 October 2020 November 2020 964 December 2020 163 1820 1931 a) Make a 3 month moving average forecasting model. Use this model to make a forecast for January 2021 b) The analysts of Electroducks, have compared sales data of air-conditioners with the average temperature at the same periods in their Scandinavian market region. They believe there is a relationship between sales and temperature. Use the following average temperature data and make a causal model to forecast demand. This table is also given in worksheet "Assignment 1" of the attached Excel file. What is your forecast for January 2021, if the forecasted temperature for January 2021 is -2.5 C? Period Average temperature (C) January 2020 -2.8 February 2020 -24 March 2020 April 2020 5.9 May 2020 11.6 June 2020 15.3 July 2020 17.6 August 2020 16.5 September 2020 October 2020 6.6 November 2020 1.6 December 2020 -2.4 1 11.8 c) Compare the models in (a) and (b). Which one is more accurate? Why? a Electroducks purchases electromotors for their dishwashers from a supplier. Their requirement for such electromotors is quite stable and non-seasonal. They estimate they need on average 1500 electromotors per month. They also estimate the standard deviation of their monthly requirement to be 200 electromotors. According to a statistical analysis, the monthly requirement of electromotors has a normal distribution They purchase each electromotor for 80 Euros. Each time they order to the supplier, no matter how many electromotors they order, they have to pay 200 Euros for transportation and 16 euros for order processing. The interest rate is estimated to be 15% per year. The supplier delivers the electromotors, one month after ordering. This delivery time is fixed. Electroducks uses a continuous review system for inventory management and control of electromotors. d) What is their optimal order size? e) if they use the optimal order size, how many orders do they make per year? For a service level of 98%, how much safety stock must they keep? B) If they keep a safety stock as calculated in (f), how much is the inventory position at which they have to make an order? What is this inventory position called? h) If they keep a safety stock equivalent to 5 days of average demand (assume each month is 30 days), how much will be their safety stock? Will they have a higher service level compared to (h? Why? 0) if they use the optimal order size and the safety stock calculated in (h), how much is their annual inventory holding cost? Do not calculate in transit inventory cost. How many days is the inventory throughput time? 1) Electroducks are using a single sourcing strategy. In the RealGame the BioCounter Ltd could also use a multiple sourcing strategy. Give three arguments for why a multiple sourcing strategy could be advantageous for Electroducks? 3 Period Average temperature 3-month moving Air-conditioners sales (C) average forecast Causal forecast Electromotors Average monthly requirements 73 -2,8 150 -2,4 1500 765 Standard deviation of monthly requirements 1 1 5,9 1820 200 2970 11,6 Delivery time from supplier 3704 15,3 1 month January 2020 February 2020 March 2020 April 2020 May 2020 June 2020 July 2020 August 2020 September 2020 October 2020 November 2020 December 2020 4130 17,6 Purchasing price per electromotor 3903 16,5 80 Euros 3001 11,8 Transportation cost for each order 1931 6,6 200 Euros 964 Order processing cost for each order 1,6 -2,4 163 16 Euros Interest rate 15% per year a) Make a 3-month moving average forecasting model. Use this model to make a forecast for January 2021, 3-month moving Period Air-conditioners sales average forecast January 2020 73 February 2020 150 March 2020 765 April 2020 1820 May 2020 2970 June 2020 3704 July 2020 4130 August 2020 3903 3001 September 2020 October 2020 1931 964 November 2020 December 2020 163