Technology and information management

Shaer Munir

2/6/18

TIM 125

HW 4

TIM 125/225, MOT II: Homework 4

Adaptive Forecasting and Cycle Inventory

Qualitative Problems:

1) Cycle Inventory: SCM, 4th, D10.1, 10.2, D10.3

1. Define

a. In this problem, we must answer the discussion questions from the text book and use the book as a resource

2. Plan

a. I will read lecture notes and the chapters in the book to help me with this problem.

3. Execute

a. When it come to the replenishment order cycle, the various costs incurred must be considered. There are three costs that should be considered and they are material costs, order costs, and holding costs. Material costs are the price of the inventory which is to be purchased. It is typically a fixed cost. Order costs are incurred when the order is placed and includes factors such as shipping, receiving costs, etc. When deciding on replenishment orders the amount is crucial to minimize the costs in the long term. Lastly the holding cost, which stems from abundance when replenishing, refers to the cost of holding inventory for a period.

b. ALL the various costs here are affected by a decrease in lot size in the following ways. Ordering costs have the potential of changing, and typically can be seen increasing when experience a decrease in lot size. This would be since larger orders typically cost less on average per unit due to various factors. Holding costs would experience a decrease because they would not be able to move the units and they would just sit in their warehouse. This can cause the warehouse or lot to hold less new incoming units since they have the old units still in their lot.

c. When demand increases, there would be a need to fill more order and that means they would need more inventory which then would lead to an increase in the size of the lot. Cycle inventory would increase in this situation.

4. Check your work

a. To my knowledge, my work is correct

5. Learn and Generalize

(a) After completing this problem, I have a better understanding on how to do work with inventory management.

2) Tahoe Salt (Chapter 7 continued) Forecast demand using the: Holt and Winter Adaptive Forecasting methods. Your solutions should match the solutions in the book.

(1) Define

(a) Forecast demand using the: Holt and Winter Adaptive Forecasting methods.  Your solutions should match the solutions in the book.

(2) Plan

(a) For this problem, I will Use the Tahoe Salt data to forecast the demand using Holt’s forecasting method as well as the Winter’s forecasting method.

(3) Execute

The spreadsheet table below are the results that I have obtained from the completing the Holt’s and winters model. I have exported the results from the Excel sheet I have created to work this solution.

Period t	Demand Dt	Level Lt	Trend Tt	Forecast Ft	Error Et	Absolute Error At	Mean Squared Error MSEt	MADt	% Error	MAPEt	TSt
0		12,015	1,549
1	8,000	13,008	1,438	13,564	5,564	5,564	30,958,096	5,564	70	69.55	1.00
2	13,000	14,301	1,409	14,445	1,445	1,445	16,523,523	3,505	11	40.33	2.00
3	23,000	16,439	1,555	15,710	-7,290	7,290	28,732,318	4,767	32	37.46	-0.06
4	34,000	19,594	1,875	17,993	-16,007	16,007	85,603,146	7,577	47	39.86	-2.15
5	10,000	20,322	1,645	21,469	11,469	11,469	94,788,701	8,355	115	54.83	-0.58
6	18,000	21,570	1,566	21,967	3,967	3,967	81,613,705	7,624	22	49.36	-0.11
7	23,000	23,123	1,563	23,137	137	137	69,957,267	6,554	1	42.39	-0.11
8	38,000	26,018	1,830	24,686	-13,314	13,314	83,369,836	7,399	35	41.48	-1.90
9	12,000	26,262	1,513	27,847	15,847	15,847	102,010,079	8,338	132	51.54	0.22
10	13,000	26,298	1,217	27,775	14,775	14,775	113,639,348	8,981	114	57.75	1.85
11	32,000	27,963	1,307	27,515	-4,485	4,485	105,137,395	8,573	14	53.78	1.41
12	41,000	30,443	1,541	29,270	-11,730	11,730	107,841,864	8,836	29	51.68	0.04

Period t	Demand Dt	Level Lt	Trend Tt	Seasonal Factor St	Forecast Ft	Error Et	Absolute Error At	Mean Squared Error MSEt	MADt	% Error	MAPEt	TSt
		18,439	524
1	8,000	18,866	514	0.47	8,913	913	913	832,857	913	11	11.41	1.00
2	13,000	19,367	513	0.68	13,179	179	179	432,367	546	1	6.39	2.00
3	23,000	19,869	512	1.17	23,260	260	260	310,720	450	1	4.64	3.00
4	34,000	20,380	512	1.67	34,036	36	36	233,364	347	0	3.50	4.00
5	10,000	20,921	515	0.47	9,723	-277	277	202,036	333	3	3.36	3.34
6	18,000	21,689	540	0.68	14,558	-3,442	3,442	2,143,255	851	19	5.98	-2.74
7	23,000	22,102	527	1.17	25,981	2,981	2,981	3,106,508	1,155	13	6.98	0.56
8	38,000	22,636	528	1.67	37,787	-213	213	2,723,856	1,037	1	6.18	0.42
9	12,000	23,291	541	0.47	10,810	-1,190	1,190	2,578,653	1,054	10	6.59	-0.72
10	13,000	23,577	515	0.69	16,544	3,544	3,544	3,576,894	1,303	27	8.66	2.14
11	32,000	24,271	533	1.16	27,849	-4,151	4,151	4,818,258	1,562	13	9.05	-0.87
12	41,000	24,791	532	1.67	41,442	442	442	4,432,987	1,469	1	8.39	-0.63
13				0.47	11,940
14				0.68	17,579
15				1.17	30,930
16				1.67	44,928

(4) Check your work

(a) After completing this problem, I have gone back and checked my work and to my assumption my work is correct after using the correct formulas for the spreadsheet.

(5) Learn and Generalize

(a) After completing this problem, I have a better understanding on how to do a Holt’s and Winter Model.

3) Hot Pizza, Chapter 7, Exercise 2.

1) Define

a) Estimate demand for the next four weeks using a four-week moving average as well as simple exponential smoothing with 𝝰=0.1.  Evaluate the MAD, MAPE, MSE, bias, and TS in each case.  Which of the two methods do you prefer?  Why?

2) Plan

a)

3) Execute

a) Given to us is the following information

Week	Demand ($)	Week	Demand ($)	Week	Demand ($)
1	108	5	96	9	112
2	116	6	119	10	102
3	118	7	96	11	92
4	124	8	102	12	91

4) Check your work

a)

5) Learn and Generalize

a)

1. Flower Wholesaler, Chapter 7, Exercise 3

1. Define

2. Plan

3. Execute

4. Check your work

5. Learn and Generalize

6. ABC Corporation: SCM, Chapter 7, Exercise 4 (Do “Winter’s Method” only.)

1. Define

2. Plan

3. Execute

4. Check your work

5. Learn and Generalize

6. Harley Davidson: SCM, Chapter 10, Exercises 1, 2

1. Define

a. Harley Davidson has its engine assembly plant in Milwaukee and its motorcycle assembly plant in Pennsylvania.  Engines are transported between the two plants using trucks, with each trip costing $1,000.  The motorcycle plant assembles and sells 300 motorcycles each day.  Each engine costs $500, and Harley incurs a holding cost of 20% per year.  How many engines should Harley load onto each truck?  What is the cycle inventory of engines at Harley?

b. Harley Davidson has its engine assembly plant in Milwaukee and its motorcycle assembly plant in Pennsylvania.  Engines are transported between the two plants using trucks, with each trip costing $1,000.  The motorcycle plant assembles and sells 300 motorcycles each day.  Each engine costs $500, and Harley incurs a holding cost of 20% per year.  How many engines should Harley load onto each truck?  What is the cycle inventory of engines at Harley?

2. Plan

a. I will use the notes that were given to me in class to solve this problem.

3. Execute

a. To start this problem, we must figure out how many engines should Harley Davidson should load onto each truck.

b. The given information is:

i. Transportation costs = $1,000

ii. Material Costs = $500 per unit

iii. Holding Costs = 20% per year

iv. Demand = 300 motorcycles per day

c. We then must use the formula of finding the optimal lot size which is Annual Demand = 300*365 days = 109,500 units/year

QL* = √(2D*S)/√(hC)

= √(2)(109,500)($1,000)/√(500*.2)

=√219000000/√100

=√2190000

=1480 units per truck.

d. Next, we must determine what is the cycle inventory of engines at Harley?

QL*/2 = 1480/2 = 740 cycle inventory

Find the shipment frequency:

n* = D/QL* = 109,500/1480 = 74 shipments per year.

e. In the next question we must figure out, If each truck trip still costs $1,000, how does this decision impact annual inventory costs?

Transportation costs = $1,000

Material Costs = $500 per unit

Holding Costs = 20% per year

Demand = 300 motorcycles per day (109,500 per year)

QL*= 100

Find the annual inventory hold costs:

Ci = (QL/2)*(hC)

=(740/2)*1000

=$370,000

f. Lastly, we must figure out What should the cost of each truck be if a load of 100 engines is to be optimal for Harley?

Find the shipment frequency:

n* = D/QL* = 109,500/100 = 1095 shipments per year

4. Check your work

(a) After completing this problem, I have gone back and checked my work and to my assumption my work is correct after using the correct formulas.

5. Learn and Generalize

(b) After completing this problem, I have a better understanding on how to do work with inventory management.

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