OPMT 310 –Summer 2015

Homework Guidelines

As business students, you are expected to present your assignments in a professional manner. For your assignments, please use the following guidelines:

1. Your assignments should be labeled with your name, HW#, and date.

2. Where possible, your work should by typed with correct grammar and spelling.

3. Mathematical problems, equations, or drawings may be hand drawn, but they must be legible and neat.

4. Your work must be stapled, in correct order, if there are multiple pages.

5. Show your work! Partial credit cannot be awarded if your work is not shown. You get partial credit for good methodology.

6. Be sure to state and support your answers clearly. It is important that you show your thought process in solving problems.

7. Ask for clarification, if necessary.

If you do not adhere to these guidelines your assignment will not be graded.

Q1. Forecasting Problem(10 Points)

Please complete Problem 22 (pg. 481 in the 14th edition).

Only complete calculations through week 6 and show work for at least three of the six periods. Using Excel is fine, even preferred, but please show your work in some way.

Q2. Forecasting Problem (10 Points)

Assume a previous forecast including trend of 100 units, a previous trend estimate of 15 units, an alpha of .25 and a delta of .25. If actual demand turned out to be 110 units rather than the forecast of a 100 units, calculate the forecast including trend for the next period.

Q3. Aggregate Planning (S&OP) Problem (10 Points)

Consider the following modifications to the Good and Rich Candy Company example from class. How would the aggregate planning strategy change in each case provided?

Data from class lecture slide:

Spring: forecasted demand=80,000

Summer: forecasted demand=50,000

Fall: forecasted demand=120,000

Winter: forecasted demand=150,000

Hiring cost = $100 / worker

Firing cost = $500 / worker

Regular Production Cost = $2 / pound

Inventory carrying cost = $0.50 / pound / quarter

Production per employee = 1,000 pounds / quarter

Beginning work force = 100 workers

Beginning inventory = 0

Cost of level production strategy = $870,000

Cost of chase demand strategy = $835,000

a) Inventory carrying cost is reduced to $0.25 per lb. per quarter. Consider both level production and chase demand strategies.

b) Sales promotions are successful in shifting demand of 25,000 lbs. of candy from Fall to Summer and 20,000 lbs. from Winter to Spring. Which planning strategy is best?

Level Production Strategy

Quarter Sales Production Inventory

Spring

Summer

Fall

Winter

Cost =

Chase Demand Strategy

Quarter

Sales

Production

Workers Needed

Workers Hired

Workers Fired

Spring

Summer

Fall

Winter

Cost =

Q4. Forecasting Error Problem (10 Points)

The following table shows predicted product demand using a particular forecasting method along with the actual demand that occurred.

Period Forecast Actual Deviation RSFE Absolute deviation Sum of Absolute deviations MAD TS

1 1500 1550

2 1400 1500

3 1700 1600

4 1750 1650

5 1800 1700

a) Compute the tracking signal using the MAD and the running sum of forecast errors.

b) Discuss whether the forecasting method is giving good predictions.

Q5. Single Period Inventory Problem(5 Points)

Mac wishes to determine the number of copies of The Computer Journal he should purchase each Sunday.

A study of the historical data showed that the demand is approximately normally distributed with mean = 11.73 and standard deviation = 4.74. Mac purchases the magazines for 25 cents and can sell them for 75 cents. He can salvage unsold copies for 10 cents.

a) Calculate the overage cost.

b) Calculate the underage cost.

c) How many copies of the Journal should Mac purchase?

Q6. InventoryManagement Problem (5 Points)

Refer to the inventory management models: Q-model (exhibit 20.7) and P-model (exhibit 20.8) on pages 527 and 530, respectively, in the 14th edition.

Describe the 3-4 key differences between these two models/approaches to inventory management. Use full, descriptive, well-written sentences.