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Forecasting Questions

Student Name

University Affiliate

Forecasting Questions

Problem 1: Planning

Step 1: Define – Create a list of all the tasks that require to be completed so as to complete this examination appropriately and keep a track of the tasks accordingly

Step 2: Plan – What information is available for solving the problem? Lecture Notes and Canvas Handouts. The lecture Notes provided is from Notes on PERT Chart, GRANTT Chart and Activity Matrix.

Step 3: Execute - Create an activity matrix and a table to make comparisons on your plan

Activity Matrix

GRANT chart

GANTT CHART

PROJECT TITLE

CSE171B Midterm

COMPANY NAME

CSE171B

PROJECT MANAGER

Shen Cheng

DATE

2/11/2019

WBS NUMBER

TASK TITLE

TASK OWNER

START DATE

END DATE

DURATION

PCT OF TASK COMPLETE

FRIDAY

SATURDAY

SUNDAY

MONDAY

TUESDAY

Problem1: Planning

1.1

Activity Matrix

Shen Cheng

2/7/20

100%

1.2

GANTT chart

Shen Cheng

2/7/20

2/11/20

100%

1.3

PERT Chart

Shen Cheng

2/7/20

2/11/20

100%

1.4

Keep track of each task and document

Completion

Shen Cheng

2/7/20

2/11/20

100%

Problem2

2.1

Read the Specialty Packaging Corporation Case

Study

Shen Cheng

2/8/20

100%

2.2

Competitive Strategy

Shen Cheng

2/8/20

100%

2.3

Supply Chain Strategy

Shen Cheng

2/8/20

100%

2.4

Where does SPC lie in the zone of strategic fit

between IDU and responsiveness?

Shen Cheng

2/8/20

100%

2.5

Identify what SPC’s high-level SC strategy

should be for each of the SC drivers.

Shen Cheng

2/8/20

100%

Problem 3

3.1

Form Hypothesis

Shen Cheng

2/8/20

2/10/20

100%

3.2

Forecast Demand for black plastic using the 5

Methods

Shen Cheng

2/8/20

2/10/20

100%

3.3

Identify the better method for Black plastic.

Shen Cheng

2/8/20

2/10/20

100%

3.4

Was the Hypothesis Correct?

Shen Cheng

2/8/20

2/10/20

100%

3.5

Forecast Demand for 2007Black plastic.

Shen Cheng

2/8/20

2/10/20

100%

Problem 4

4.1

Why should SPC have a cycle inventory?

What are the following values for black plastic?

Shen Cheng

2/10/20

100%

4.2

Shen Cheng

2/10/20

100%

4.3

Short-Term Discounting

Shen Cheng

2/10/20

100%

Problem 5

5.1

Should SPC have a safety inventory? Why? How much safety inventory would you recommend

for SPC?

Shen Cheng

2/11/20

100%

Problem 6

Shen Cheng

6.1

Create table to compare your plan

Shen Cheng

2/11/20

100%

PERT Chart

Identify the “critical path” using a PERT Chart

Running head: FORECASTING QUESTIONS 1

FORECASTING QUESTIONS 18

Tasks	Actual Time Allocated
A	20 Minutes
B	40 Minutes
C, D, E	15 Minutes Each
F, G, H, I	15 Minutes Each
J	5 Minutes
K	300 Minutes
L	10 Minutes
M	5 Minutes
N	15 Minutes
O	55 Minutes
P	20 Minutes
Q, R	15 Minutes
S	30 Minutes

Keep track of each task and document completion

Step 4: Check – Is the work done correct in every detail? This work is correct all ways because while working on the problem, intense planning was conducted for execution. To make it more clear and accurate, there was the use of lecture notes and canvas handouts for reference.

Step 5: Learn and Generalize – This exercise has been great as it has enabled me to stay on track and also become more accurate and precise. This will help me produce high quality results during finals.

Problem 2: Supply Chain Strategy for SPC

Step 1: Define the Problem - Establish and Analyze SPC’s competitive strategy

Step 2: Plan – Step 2: The information available for solving the problem include lecture notes, textbooks and the ‘Specialty Packaging Corporation’ Case Study

Step 3: Execute – SPC’s competitive strategy should be the Porter’s Five Forces Model. This is shown in the diagram below

Competitive Strategy

Porter’s Five (Six) Forces Analysis

( New Entrants: Alpha Packaging SKS Suppliers: Polystyrene Resin supplier Competitors: Amcor Berry Plastic Tetra Pak Buyers: Supermarket Consumers Compliments: N/A Substitutes: Ceramic Glass Eco-Friendly Materials )

Explanation of the six forces:

The Porter’s Model has five forces and they will help SPC in the following ways; i. Competitors –Competition is very high because most companies packaging process is affordable as plastic is cheap. ii. New Entrants – The force of new entrants is low as most new entrants are small scale company’s iii. Complements – There are no complements obtained iv. Suppliers – the supplier force is medium v. Buyers – The buyer’s force is high vi. Substitutes – The large force of substitute products is low.

Supply Chain Strategy

SPC Strategic Fit

Efficiency/Responsiveness Spectrum

Highly Efficient Somewhat Efficient Somewhat Responsive Highly Responsive

In the manufacturing and supply of plastic containers, Specialty Packaging Corporation (SPC) is supposed to aim for high efficiency in its supply chain to be able to match with customer’s demand. The following graph represents the Implied Demand Uncertainty for SPC.

Implied Demand Uncertainty

High Responsiveness / Low Efficiency

Low Responsiveness / High Efficiency

Low IDU High IDU

In the above figure, SPC lies at the lower part of the IDU and it is responsive in the Zone of Strategic Fit due to the relatively low demand of products prevailing. SPC is required to develop strategies that will enable it to have a high-level supply chain strategy. Therefore, SPC is required to identify with six drivers that help in improving the supply chain and they are Transportation, Facilities, Inventory, Information, Pricing and Sourcing. Developing these factors will help in enhancing efficiency in the supply chain process.

Step 4: Check – My assumptions on the company and products are valid. I have also understood the SPC Manufacturing process

Step 5: Learn and Generalize – SPC’s function in the supply chain process should be cohesive and should also work towards succeeding in its objectives.

Problem 3: Demand Forecasting For SPC

Step 1: Define – Establish the hypothesis and forecasting method that Julie William should use

Step 2: The information available for solving the problem include lecture notes, textbooks and the ‘Specialty Packaging Corporation’ Case Study

Step 3: Execute

Static Method

Given Data

Year	Period	Quarter	Black plastic Demand ('000 lbs)
2002	1	I	2250
	2	II	1737
	3	III	2412
	4	IV	7269
2003	5	I	3514
	6	II	8143
	7	III	3459
	8	IV	7056
2004	9	I	4120
	10	II	2766
	11	III	2556
	12	IV	8253
2005	13	I	5491
	14	II	4382
	15	III	4315
	16	IV	12035
2006	17	I	5648
	18	II	3696
	19	III	4843
	20	IV	13097

De-seasonalize the demand in order to run linear regression to estimate various levels and trends. The equation to use is:

We are measuring demand on a quarterly basis therefore; periodicity (p) is 4. We then start deseasonalizing demand at period (t) =3.

Excel formula used: = (D2+D6+2*SUM (D3:D5))/8

Year	Quarter	Period	Black plastic Demand ('000 lbs)	De-Seasonalized Demand
2002	I	1	2250
	II	2	1737
	III	3	2412	3575
	IV	4	7269	3784
2003	I	5	3514	3965
	II	6	8143	4070
	III	7	3459	4119
	IV	8	7056	4272
2004	I	9	4120	4237
	II	10	2766	4275
	III	11	2556	4596
	IV	12	8253	4969
2005	I	13	5491	5391
	II	14	4382	6083
	III	15	4315	6575
	IV	16	12035	6509
2006	I	17	5648	6490
	II	18	3696	6688
	III	19	4843
	IV	20	13097

Forecasting using Holt’s Method

We now forecast demand using Level and Trend corrected exponential smoothing. The assumption is that the data has level, L, and trend, T, only. Process:

Step 1: Regress the given data to compute the initial values of the level, L0, and initial trend T0. Forecast, F1 = L0 +T0.

Step 2: Adapt Use two smoothing constants, α=0.06 and β=0.06, to smooth respectively level and trend. L1 = αD1 + (1-α) [L0 +T0], T1 = β [L1 – L0] +(1-β) T0, Forecast, F2 = L1 +T1

Step 3: Forecast. Ft+1 = Lt +Tt, Lt+1 = αDt+1 + (1-α) [Lt +Tt], Tt+1 = β [Lt+1 – Lt] +(1-β) Tt

In order to obtain L0 and T0, I graphed the Demand for black plastic and obtained the slope of the functions as L0= 2042.8 and T0=286.61

Forecasting using Winter’s Method

Winter’s Method starts off similarly to the static method. We de-seasonalize demand by running it through a regression analysis, and then find the seasonal factors for it. Since the data remains the same as the static method, the values are equal to: L = 3046.5 and T = 226.87

Savg1 = (S1+S5+S9+S13+S17)/5 = 0.81, Savg2 = (S2+S6+S10+S14+S18)/5 = 0.54, Savg3 = (S3+S7+S11+S15+S19)/5 = 0.64, Savg4 = (S4+S8+S12+S16+S20)/5 =1.65

Initial Forecast = F1= (L0+ T0) (S1) = 2665

Adaptation: Let α=0.06, β=0.06, γ=0.06, Lt+1 = α (Dt +1/St+1) + (1-α) (Lt + Tt), Tt+1 = β (Lt+1 – Lt) + (1 - β) Tt, St+p+1 = γ (Dt +1/Lt+1) + (1 - γ) St+1

Demand Vs Forecast using Winter’s Method

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The forecasting method that Julie Williams should use is the Winters Forecasting Method as it has been able to forecast black plastic well. After analyzing the data, it is correct to say that the greatest factor is the seasonality of data and there is a negative significant trend. The forecasting results were as follows and the annual demand was drawn to be 28770 in the year 2007.

2007 Demand Forecast for Black Plastic (‘000lb.):

Year	Quarter	Period	Forecast Ft
2007	I	21	6090
	II	22	4197
	III	23	5042
	IV	24	13441

Step 4: Check – I have gone through the work several times and I have elaborated all numbers and equations appropriately. My assumptions are also reasonable as the results that I obtained make a lot of sense.

Step 5: Learn and Generalize – To establish the most appropriate method of forecasting, we have to try all methods and see how well they predict the actual demand. Through error analysis, we have been able to see which method was the best for Julie and Winters Model was finalized to be appropriate to improve her supply chain and match with both supply and demand.

Problem 4: Cycle Inventory for Polystyrene At SPC

Step 1: Define – Establish why SPC should have a cycle inventory in place.

Step 2: Plan – Information for this question is available on Lecture Notes, Textbooks and SCM text on ‘Short-Term Discounting’

Step 3: Execute

SPC should have a cycle inventory so that it may be able to minimize its total inventory costs. SPC can also minimize the total cost of holding inventory and transportation through calculating the optimal quantity of inventory per shipment.

Given data/data from problem 3

Variables: Annual demand for black plastic = 28,770, Unit Cost =$25.00, % Holding Cost = 15%, Fixed shipping cost per order =$300, 1 unit = 1000 pounds (lbs)

a. Lot size per shipment to minimize total cost

D = annual demand = 28,770 S = 300 h = 0.10 C =20, Q* = = = 2,145.50693. Lot size per shipment to minimize total cost is approximately 2,146 units

b. Economic order quantity(EOQ)

The EOQ is similar with the Optimal Order Size which is also the lot size per shipment. The total cost has been minimized therefore the Economic Order Quantity is equal to 2,146 units.

c. Number of shipments/year of polystyrene resin in order to meet the forecasted demand for black plastic in2007.

D = annual demand = 28,770 Q* = 2,146 units, Insert formula as 28,770/2,146 =13.406337

Number of shipments/year of polystyrene resin in order to meet the forecasted demand for black plastic in 2007 is approximately 13 shipments.

d. Cycle inventory

Q* = 2,146 units, Insert formula as 2,146/2 = 1073. The Cycle Inventory is approximately 1,073 units.

e. Cycle inventory holding cost

Holding cost =hC

Cycle inventory holding cost = (Q*/2) hC

(2,146/(2) (0.15)(25) =4,023.75

Cycle inventory holding cost is $4,023.75

f. Replenishment cycle time

a. 𝑅𝑒𝑝𝑙𝑒𝑛𝑖𝑠ℎ𝑚𝑒𝑛𝑡𝑐𝑦𝑐𝑙𝑒𝑡𝑖𝑚𝑒= # days in a year / # shipment/year

b. 365/13 =28.08

Replenishment cycle time is approximately 33days

g. Average flow time

D = annual demand = 28,770 Q* = 2,146 units

2,146/2 (28,770) = 0.0372957

Average flow time is around 0.037 year = 0.44 month = 13days

Short Term Discounting:

Now, if the supplier offers a promotional discount of 25% per unit at the beginning of the year, we determine the optimal order quantity and the size of the forward buy below:

Given Data

d = discount = 25%, D = demand = 28,770, h = 15%, C = 25, Q* = 2,146

Qd = 0.25(28,770) / (25-0.25)0.15 + 25(2,146)/(25-0.25)

Qd =7,192.50 / (24.75)0.15 + 53,650/24.75

Qd = 7192.50 / 3.7125 + 53,650/24.75

Qd =1937.3737 + 2167.6768

Qd = 4,105.0505

Insert formulae to obtain 4,105.0505, therefore optimal order quantity at the discounted price is around 4,105 units

Forward buy = 4,105 – 2,146 = 1,959 units

Step 4: Check – My work is correct and accurate as I used the required texts and notes in every detail. Therefore, my assumptions are correct and accurate.

Step 5: Learn and Generalize – After calculating the values of optimal lot size and economic order quantity, SPC can also take advantage of the economies of scale. I now have a better understanding on short-term discounting.

Problem 5: Safety Inventory for Polystyrene Resin at SPC.

Step 1: Define – Establish whether SPC should have a safety inventory

Step 2: Plan – Information is available on Lecture Notes and Textbooks

Step 3: Execute

SPC is required to have a safety inventory for polystyrene resin at SPC as the demand is uncertain and product storage problems may occur if the actual demand exceeds the forecasts. SPC should also ensure that it has maintained a safety inventory for black plastic. The amount of safety inventory that I would recommend for SPC will vary due to certain circumstances.

The black plastic peak reduces every second quarter of the year and by using the Winter’s method, the tracking signal value at period 13 is estimated to be 2.03. The forecasts as period 13 have a value of 11,825 and the actual demand is 13,673. Results show that SPS is supposed to have a safety inventory of 2000 units to counteract the underestimation with the remaining left over inventory which can also be used for other future periods.

Step 4: Check - My estimates on the amount of Safety Inventory that SPC should hold seem reasonable and my assumptions are true as I have used the required textbooks and lecture notes appropriately.

Step 5: Learn and Generalize – I have learned that with a basic understanding of safety inventory, a manager can reach at a reasonable estimate on the amount of safety inventory required.

Problem 6: Execution of Your Plan

Step 1: Define - Using a table compare your plan from Problem 1 with its execution. Indicate the reasons for the difference between the plan and its execution. Add at least one more column.

Step 2: Information for the problem is obtained from Problem 1 solutions. Assumptions have been made by using the problem solver, student and audience. Build a table to compare the plan with the execution.

Step 3: Execute the Plan

Plan	Execution	Reason	Improvements
Problem 1: 0.6 Hours	Finished on time Hours Spent: 0.6	No difference, plan was well executed, and work done accurately	No improvements needed because everything went as planned.
Problem 2: 1.5 Hours	Finished on time Hours Spent: 1.0	This problem was pretty straightforward, .	No improvements needed because everything went as planned.
Problem 3: 5.0 Hours	Took much longer than I expected Hours Spent: 5.5	This problem was time consuming and getting correct data and numbers was quite difficult.	In the future I will automate to process of forecasting using Visual Basic.
Problem 4: 1.6 Hours	Also took longer than I expected Hours Spent: 1.8	Time Planning was unplanned hence I started the question late	The problem was executed well
Problem 5: 0.3 Hours	Finished Earlier than expected Hours Spent: 0.4	No difference due to being on schedule going into this phase of the project	I lacked more data information for extensive analysis of the question
Problem 6: 0.4 Hours	Finished on time Hours Spent: 0.6	No difference, plan was well executed, and work was clear and accurate	No improvements were required as everything was planned well.

Step 4: Check – The work written is correct and accurate as study was done through using observations.

Step 5: Learn and Generalize – The demand forecasting problem was very time consuming as it has more problems to solve than others.