Problem Set 1

All rights are reserved. The material contained herein is the copyright property of Embry-Riddle Aeronautical University, Daytona Beach, Florida, 32114. No part of this material may be reproduced, stored in a retrieval system or transmitted in any form, electronic, mechanical, photocopying, recording or otherwise without the prior written consent of the University.

College of Business | worldwide.erau.edu

Answer the three (3) questions on demand forecasting and customer relationship management.

Submit your answers in either a Word® document or as an Excel® file. If your preference is Excel®, use multiple worksheets (tabs), with an answer to each question on a separate worksheet.

Principles of Supply Chain Management LGMT 444

Problem Set 1

1. Based on the information shown below, develop forecasts for April to October using:

(a) A 3-period weighted moving average model (w1 = 0.5, w2 = 0.3, and w3 = 0.2).

(b) An exponential smoothing model with α = 0.35. Assume the forecast for March was 950.

Month	Actual Demand
Jan	1050
Feb	975
Mar	1000
Apr	870
May	970
Jun	1220
Jul	1170
Aug	1150
Sep	1235
Oct	1275

2. Based on the information shown below, calculate MAD, MSE and tracking signal.

Week	Actual Demand	Forecast
1	750	770
2	690	730
3	820	710
4	850	790
5	870	840
6	780	850
7	915	890
8	950	920

3. For the information given, rank the customers in terms of customer lifetime value.

Avg. Annual Sales Avg. Profit Margin Expected Lifetime

Customer 1: $3,450 17 % 8 years

Customer 2: $2,000 13 % 6 years

Customer 3: $1,400 32 % 10 years

Use a discount rate of 6 percent and treat the average sales figures as annuities. Should any of these customers be fired?

1