Mgt613 Assignment No. 1 Fall 2011 solution
Thursday, October 27, 2011 Posted In MGT Edit ThisSemester “Fall 2011”
“Production and operations management” (MGT613)
Assignment No. 1 Marks: 20
FIFCO is a football manufacturing company in Sialkot, it has started its operations from January 2000 and since then the company is unable to gain ample profits and grab the expected market share. The major mismanagement noticed is especially in the area of inventory management. Due to this finished stocks are pilling up in the warehouses. The situation is very drastic and company is unable to handle its stock. It seems that the company is facing problems in their forecasting, as the company is unable to assess and meet the actual market response that might affect the demand and fulfillment of customer’s orders. After analyzing the situational factors it seems that the company is unable to forecast demand effectively. The actual and forecasted demand of the past five years is given as under:
Years
2005
2006
2007
2008
2009
Actual demand (Units)
4000
3700
4000
4150
4050
Demand Forecasted (Units)
4500
4000
3500
3500
4200
The situation is very alarming for management and you as an operation manager of the company are required to examine and analyze all scenarios and give your recommendations that:
What would be the core areas you have to cover in order to have a most accurate forecast for the company?
What are the steps you would like to follow in the design of a most effective forecasting process? Give your suggestions after analyzing the variances in given table.
Important Tips
This Assignment can be best attempted from the knowledge acquired after watching video lecture no. 01 to lecture no. 09 and reading handouts as well as recommended text book).
Video lectures can be downloaded for free from Online VU Lectures.
Schedule
Oct 21st, 2011
Oct 28th, 2011
Note:
Only in the case of Assignment, 24 Hrs extra / grace period after the above mentioned due date is usually available to overcome uploading difficulties which may be faced by the students on last date. This extra time should only be used to meet the emergencies and above mentioned due dates should always be treated as final to avoid any inconvenience.
Solution:
Q. 1 answer is in lecture No. 9, and Q. 2's answer is on page 45. Kindly take the data from the said locations.
Question N0.1
What would be the core areas you have to cover in order to have a most accurate forecast for the company?
Answer:-
Forecasting is a natural extension to the types of data analysis typically performed on the historical data stored in analytic workspaces. Using Analytic Workspace Manager, you can quickly generate forecasts of your measures.
Here I discuses Some core areas for accurate forecast related to inventory management because in the above scenario the major mismanagement noticed is especially in the area of inventory management.
Counting current stock:-
All business must know what they have on hand and evaluate sock levels with respect to current and fore-casted demands. Company managers must know what they have in stock to ensure that they can meet the demands of the customers and production and be sure that you are ordering enough stock in the future. Counting is also important because it is the only way you will know if there is a problem with theft occurring at some point in the supply chain of inventory.
Cyclical counting:-
Companies prefer to count inventory on a cyclical basis to avoid the need for shutting down operation while stock is counted. This means that a particular section of the warehouse or plant is counted at particular times, rather than counting all inventory at once. In this way, the company takes physical count of inventory, But never counts the entire inventory at once.
Controlling supply and demand:-
Whenever possible, obtain a commitment from a customer for a purchase. In this way, you ensure that the items your order will not take space in your inventory for long. When this is not possible, you may be able to share responsibility for the cost of carrying goods with the salesperson, to ensure that an order paced actually results in a sale.
Stock control:-
Approval procedures should be arranged around several factors. You should set minimum and maximum quantities which your buyers can order without prior approval. This ensures that you are maximizing any volume discount available through your vendor and preventing over-ordering of stock.
Keeping accurate records:-
Any time items arrive at or leave a warehouse, accurate paperwork should be kept, itemizing the goods. When inventory arrives, this is when you will find breakage or loss on the goods you ordered. Inventory leaving your warehouse must be counted to prevent loss between the warehouse and the point of sale. Records should be processed quickly, at least in the same day that the withdrawal of stock occurred.
Managing employees:-
Buyers are the employees who make sock purchases for your company. Reward systems should be set in place that encourage high levels of customer’s service and return on investment for the product lines the buyer manages. Incentives programs can help employees keep this in perspective. When they see a difference in their paychecks from poor inventory management, they are more likely to take precautions to prevent shrinkage.
Question N0.2
1. What are the steps you would like to follow in the design of a most effective forecasting process? Give your suggestions after analyzing the variances in given table.
Answer:-
Keys like to follow for most effective forecast.
Time series:-
Time series forecasting methods are based on the premise that you can predict future performance of a measure simply by analyzing its past results.
These methods identify a pattern in the historical data and use that pattern to extrapolate future values. Past results can, in fact, be a very reliable predictor for a short period into the future. You can generate this type of forecast very quickly and easily, and you do not need either forecasting expertise or an in-depth knowledge of your data.
The modeling techniques used by the time-series methods are relatively simple and run very fast. Time-series forecasting is extremely useful when hundreds or thousands of items must be forecast.
Use Scenario-Based Forecasts:-
One forecast is not enough. Consider what will happen if conditions change. For example, how might your forecast change if your competitors react strongly to your strategy? How might it change if they don’t react at all? If the government changes a policy that makes your product tax free. All of these factors will influence sales, so the smart executive considers multiple scenarios. While the executive may not expect the government to make something tax free, scenarios can be created that consider favorable government regulation, stable regulation, and negative regulation, just as one can consider light competitive reaction, moderate reaction, or strong reaction.
Use Multiple Methods:-
Since forecasts are estimates, the more estimates generated from various methods, the better. For example, combining expert opinions with a trend analysis could help you not only understand what is happening but also why. Every forecast results in decisions, such as the decision to hire more people, add manufacturing capacity, order supplies, and so forth. In addition, practice makes perfect, as they say. The more forecasts you have to make and resulting decisions you have to live with, the better you will get at forecasting.
Track Actual Results and Adjust:-
As time goes on, forecasts that have been made should be adjusted to reflect reality. You must have an annual forecast, the forecast changes regularly based on how well the company is doing. Further knows how strongly competition has reacted and can adjust the company’s estimates accordingly.
Use tools wisely:-
Many companies tend to rely solely on qualitative tools-the opinions of experienced manager and salespeople derive forecast ignoring such quantitative tools as regression and time-series analysis. The key is that both quantitative and qualitative tools are integral to effective forecasting problem. Without understanding where qualitative techniques, time series and regression do and do not work effectively, it is impossible it is impossible to analyze the cost and achieve the benefits of implanting new forecasting tools.
Measure:-
Obviously, before forecaster can be rewarded for excellence, a company must first develop system for measuring performance, tools for providing feedback, and standards and targets for what constitutes forecasting excellence. Without the ability to effectively measure and track performance, there is little opportunity to identify whether changes in the development and application of forecasts are contributing to business success.
