Scribd
Upload
193 views6 pages

Forecasting Solved Problems

This document provides instructions and questions for Homework 1. Students are asked to submit all homework questions in a single PDF or Word file before the first exam. Question 1 involves analyzing jobs posted on Indeed.com related to industrial engineering and supply chain management. Question 2 involves calculations related to forecasting methods, including exponential smoothing and selecting the appropriate forecasting approach. It also asks about advantages and disadvantages of subjective forecasting methods. The remaining questions involve calculations and discussions around optimal order quantity, batch size, stochastic demand, and differences between EOQ and (Q,r) inventory policies. The student is asked to consider real-world implications and additional questions for various inventory management scenarios.

Uploaded by

nidal1970
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
193 views6 pages

Forecasting Solved Problems

This document provides instructions and questions for Homework 1. Students are asked to submit all homework questions in a single PDF or Word file before the first exam. Question 1 involves analyzing jobs posted on Indeed.com related to industrial engineering and supply chain management. Question 2 involves calculations related to forecasting methods, including exponential smoothing and selecting the appropriate forecasting approach. It also asks about advantages and disadvantages of subjective forecasting methods. The remaining questions involve calculations and discussions around optimal order quantity, batch size, stochastic demand, and differences between EOQ and (Q,r) inventory policies. The student is asked to consider real-world implications and additional questions for various inventory management scenarios.

Uploaded by

nidal1970
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 6

Key Homework 1 PIC

PIC Fall 2013

Please submit all of homework 1 in a single .pdf or word file prior to the first exam.

Question 1 Look up jobs in IE on indeed.


Search industrial engineering or Industrial engineer and search the results with
these terms ( industrial engineering or Industrial engineer) and _____.
What fraction also are supply chain?
What fraction have inventory?
What fraction have quality?
Look up all scm jobs
Look up all apics jobs.
Read a few and discuss the results of your analysis in one page or less.
Answer: Responses will vary. Students should understand that many IE jobs use
the topics covered in this class.

Question 2

1. What is the mean absolute deviation (MAD) for exponential


smoothing with =.15 and a constant forecast of 500 for this
problem. The initial forecast for January is 500. What forecast
method would you select (10 pts)?

Answer:
Actual
Demand

Foreca
st

MAD

Consta
nt

MAD
Consta
nt

527

Jan

500

27

500

27

504.05

23.05

500

19

500.59
25
497.80
36

18.592
5
30.196
38

500

18

500

28

481

Feb

482

March

528

April

Average Error

24.709
72

23

Constant forecast has lower


error.

2. Discuss the advantage and disadvantages of the four subjective forecasting


methods discussed in class.
Answer:

Responses vary but all 4 methods should be discussed.

3. When should one use a subjective forecasting method instead of a time


series method (Exponential Smoothing, Moving Average, ARMA)?
Subjective methods should be used when the prior history provides
limited information about the future (major events occur including product
launch, competitors, macro economic events, ). These change of regimes
make the past history a poor predictor of the future.
Answer:

Question 1 -

You use a part at a constant rate of 5000 units per year. Each bolt cost 2 USD. The
cost of inventory is 25% of the value of the item per year. The setup cost for
ordering the item is $25.

A) What is the optimal order quantity?


Answer:
K = 25

=5000

h= 2 *.25 =.5

Q=

2 K
h

2255000
.5

= 707

B) What is the annual cost of parts, inventory and setup?


Answer:

Part cost = c*
Setup = K

/Q

= 5000*2 = 10000
= 25 *5000/707=176

Holding = hQ/2 = .5*707/2 =176


Total cost = 10352

C) You are forced to order 1000 units per order. What is the new annual cost of
parts, inventory and setup? How much did your cost increase in absolute and
percent terms.
Answer:
Q =1000 and resolve

Part cost = c*
Setup = K

/Q

= 5000*2 = 10000
= 25 *5000/1000=125

Holding = hQ/2 = .5*1000/2 =250


Total cost = 10375
Almost no difference in cost. The EOQ is robust so small changes typically do not
impact total cost.
Question 2 -

Your machine cost 300 USD to setup. The production rate is 20000 units per year.
The demand rate is 5000 units per year. The inventory cost of the item is 1 USD per
year. What is the optimal batch size? What is the time between production runs?
How long is the machine on?
Answer:
h = h(1- /P) = 1 * (1-5000/20000) = .75

Q=

2 K
h'

23005000
.75

= 2000

What is the time between production runs?

How long is the machine on?

Q
=2000 /5000

Q
=2000 /20000
P

or 2/5 of a year.

= 1/10 of a year. Just over one

month.

Homework 1- Part D Stochastic Inventory


Problem 1 - You are selling cakes at a bakery. The expected number of cakes per
day is:

Sold

PDF
1
2
3
4
5

0.2
0.3
0.2
0.1
0.05

CDF
Cummulative
Distribution
0.2
0.5
0.7
0.8
0.85

6
7
8

0.05
0.05
0.05

0.9
0.95
1

Answer:
Cr = cu/(co+cu)
The cost of going under is 6-1 = 5 (the loss
of $5 in profit).
The cost of going over is the production cost
$1.
Critical ratio = 5/(5+1) = .83333
You locate the critial ratio in the CDF and
round up.
As a result, one should order 5 items.
How many cakes should you produce? 5 items
What questions would you ask before implementing this system in a real
environment?
Answer: In a real environment, I would ask:
1.
2.
3.
4.
5.

Does the demand have a different pattern on different days? If so, the order
quanity (Q) would be different on different days.
How can we make the demand more stable?
Can we do JIT or store cakes?
How can we reduce variability?

Problem 2- A manufacturing firm produces 1000 items per month at a constant rate. The firm has
setup and holding cost for parts to be assembled. What inventory policy should you consider?
EOQ What questions would you ask before implementing this system in a real environment?
1.
2.
3.
4.
5.

Is the demand constant?


Does the lead time have variability? If yes, (Q,r) instead of EOQ.
Can we get rid of setup cost (or reduce setup cost)?
What are the transportation cost impacts of different order quantities?

Problem 3 - A retail firm is ordering items for summer. What inventory policy should
you consider? News vendor
What questions would you ask before implementing this system in a real
environment?

1.

What is the lead time for the item? If short, we can order multiple times during
the summer.
2. What are the over and under costs considering product substitution and lost
good will.
How could you forecast the demand for items?
Forecast based on style and size would be my approach. I would also include a
subject matter expert to aid the forecast. Is this item in style is difficult to answer
from raw data.
Problem 4 - What is the main difference between an EOQ and Q,r inventory policies?
Q,r has random demand during the lead time and cost for shortage. Under EOQ,
demand is constant so the policy is designed to never stockout.

You might also like