Omar has heard from some of his customers that they will probably cut back on order sizes in the next quarter. The company he works for has been reducing its salesforce due to falling demand, and he worries that he could be next if his sales begin to fall off. Believing that he may be able to convince his customers not to cut back on orders, he turns in an optimistic forecast of his next quarter sales to his manager. What are the pros and cons of doing that?
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Omar has heard from some of his customers that they will probably cut back on order sizes in the next quarter. The company he works for has been reducing its salesforce due to falling demand, and he worries that he could be next if his sales begin to fall off. Believing that he may be able to convince his customers not to cut back on orders, he turns in an optimistic forecast of his next quarter sales to his manager. What are the pros and cons of doing that?
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- It costs a pharmaceutical company 75,000 to produce a 1000-pound batch of a drug. The average yield from a batch is unknown but the best case is 90% yield (that is, 900 pounds of good drug will be produced), the most likely case is 85% yield, and the worst case is 70% yield. The annual demand for the drug is unknown, with the best case being 20,000 pounds, the most likely case 17,500 pounds, and the worst case 10,000 pounds. The drug sells for 125 per pound and leftover amounts of the drug can be sold for 30 per pound. To maximize annual expected profit, how many batches of the drug should the company produce? You can assume that it will produce the batches only once, before demand for the drug is known.Scenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. Is Ben Gibson acting legally? Is he acting ethically? Why or why not?Scenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. As the Marketing Manager for Southeastern Corrugated, what would you do upon receiving the request for quotation from Coastal Products?
- Play Things is developing a new Lady Gaga doll. The company has made the following assumptions: The doll will sell for a random number of years from 1 to 10. Each of these 10 possibilities is equally likely. At the beginning of year 1, the potential market for the doll is two million. The potential market grows by an average of 4% per year. The company is 95% sure that the growth in the potential market during any year will be between 2.5% and 5.5%. It uses a normal distribution to model this. The company believes its share of the potential market during year 1 will be at worst 30%, most likely 50%, and at best 60%. It uses a triangular distribution to model this. The variable cost of producing a doll during year 1 has a triangular distribution with parameters 15, 17, and 20. The current selling price is 45. Each year, the variable cost of producing the doll will increase by an amount that is triangularly distributed with parameters 2.5%, 3%, and 3.5%. You can assume that once this change is generated, it will be the same for each year. You can also assume that the company will change its selling price by the same percentage each year. The fixed cost of developing the doll (which is incurred right away, at time 0) has a triangular distribution with parameters 5 million, 7.5 million, and 12 million. Right now there is one competitor in the market. During each year that begins with four or fewer competitors, there is a 25% chance that a new competitor will enter the market. Year t sales (for t 1) are determined as follows. Suppose that at the end of year t 1, n competitors are present (including Play Things). Then during year t, a fraction 0.9 0.1n of the company's loyal customers (last year's purchasers) will buy a doll from Play Things this year, and a fraction 0.2 0.04n of customers currently in the market ho did not purchase a doll last year will purchase a doll from Play Things this year. Adding these two provides the mean sales for this year. Then the actual sales this year is normally distributed with this mean and standard deviation equal to 7.5% of the mean. a. Use @RISK to estimate the expected NPV of this project. b. Use the percentiles in @ RISKs output to find an interval such that you are 95% certain that the companys actual NPV will be within this interval.XYZ work in a small electric business in Basrah city. He had a sunshine controller device. He had to decide how to market his idea, and in the short term, his options could be summarised as selling the device locally, selling nationally through a website, entering a partnership with an existing company or selling the patent. His returns depended on demand, which he described as high, medium, or low. Using this simple model, he developed the matrix of potential annual gains shown below: Options Demand High Medium Low Market locally 60 90 45 Use website 23 90 78 Partnership 12 25 89 Sell patent 30 30 30 Identify the decision taken under the following approaches: (1) Equal probability (2) Regret (3) Hurwicz criterion. Note: The decision maker's degree of Pessimistic (a) is 0.3.You have been tasked with the development of an aggregate plan for the year ended 31 December 2022. Accordingly, you have developed monthly forecasts for a range of motorcycles as presented in Table 5.1, below. Table 5.1: The demand forecast developed for the year ended 31 December 2022. MONTH Jan-2022 Feb-2022 Mar-2022 Apr-2022 May-2022 Jun-2022 Jul-2022 Aug-2022 Sep-2022 Oct-2022 Nov-2022 Dec-2022 PRODUCTION DAYS DEMAND FORECAST 16 16 23 21 22 22 21 20 20 20 16 16 150 150 250 250 400 500 600 750 450 250 150 150 Compute and tabulate the daily demand for each month in the table below (round off to the nearest whole number).
- What should be our forecast accuracy target if there is a high degree of volatility in customer orders and long lead times? We have a new chief sales officer who is proposing that we should forecast in dollars, not in units/cases. I have never heard of anyone forecasting in dollars. It is true that dollarized forecasts can help Sales in knowing precisely what sales target they should be hitting. But, is it the best practice?When a new business is started, or a patent idea needs funding, venture capitalists or investment bankers will want to see a business plan that includes forecast information related to profit and loss statements. What type of forecasting information do you think would the investors be looking for? Why?The options Outlook has for handling the seasonality of magazine are adding workers during the peak season, subcontracting out some of the work, building up inventory during the slow months, or building up a backlog of orders that will be delivered late to customers. To determine how to best use these options through an aggregate plan, Outlook`s vice president of Marketing starts with the first task-building a demand forecast. Although Outlook could attempt to forecast this demand itself, a much more accurate forecast comes from a collaborative process used by both Outlook and its retailers to produce the forecast shown in Table (a). Outlook sells each book through retailers for Rs.40. The company has a starting inventory in January of 1000 books. At the beginning of January the company has a workforce of 80 employees. The company has a total of 20 working days in each month, and each employee earns Rs 4 per hour regular time. Each employee works eight hours per day on straight time…
- The options Outlook has for handling the seasonality of magazine are adding workers during the peak season, subcontracting out some of the work, building up inventory during the slow months, or building up a backlog of orders that will be delivered late to customers. To determine how to best use these options through an aggregate plan, Outlook`s vice president of Marketing starts with the first task-building a demand forecast. Although Outlook could attempt to forecast this demand itself, a much more accurate forecast comes from a collaborative process used by both Outlook and its retailers to produce the forecast shown in Table (a). Outlook sells each book through retailers for Rs.40. The company has a starting inventory in January of 1000 books. At the beginning of January the company has a workforce of 80 employees. The company has a total of 20 working days in each month, and each employee earns Rs 4 per hour regular time. Each employee works eight hours per day on straight time…Sales for the past 12 months at computer success are given here: January 3,000 July 6,300 february 3,400 August 7,200 March 3,700 Sept 6,400 April 4,100 Oct 4,600 May 4,700 Nov 4,200 June 5,700 December 3,900 a. Use a 3-month moving average to forecast the sales for the months May through December b. Use a 4-month moving average to forecast the sales for the months May through December C. Compare the performance of the two methods by using the mean absolute deviation as the performance criterion. Which method would you recommend? d. Compare the performance of the two methods by using the mean absolute percent error as the performance criterion. Which method would you recommend? e. Compare the performance of the two methods by using the mean squared error as the performance criterion. Which method would you recommend?What should be our forecast accuracy target if there is a high degree of volatility in customer orders and long lead times?