Homework #1.docx

Team 5: Mirieli Estaili da Silva Santos Sora El-Rjoob Yu Xuan Ng (Winnie) Dr. Suchithra Rajendran ISE 7350 February 11, 2023 Homework 1 1. A typical supply chain manager has to make the decisions listed below. Categorize each as strategic, tactical, or operational. (10 points) a. Number of warehouses needed and where to locate them: Strategic. b. Assignment of customer orders to inventory or production: Operational. c. Choosing vendors to supply critical raw materials: Strategic. d. Selecting a transportation provider for shipments to customer: Tactical. e. Given the factory capacity, determining the quarterly production schedule: Tactical. f. Choosing to produce a part internally or to outsource that part: Strategic. g. Setting inventory policies at retail locations: Tactical. h. Choosing a transportation mode for shipping: Tactical. i. Reordering materials to build inventory: Operational. j. Allocating inventory to customer backorders: Operational. k. Creating the distribution plan to move finished goods inventory from warehouses to retail locations: Tactical. 2. Explain the differences between qualitative and quantitative forecasting methods. Which method is applicable under what conditions? (5 points) Qualitative forecasting method is appropriate when lacking historical data, such as when launching a new product. It includes market research and analysis, experts’ opinions, and surveys. Quantitative forecasting method assumes that the forces that generated past demand will continue to generate future demand. 3. N&O : Chapter 2, #13 (10 points) Two forecasting methods have been used to evaluate the same economic time series. The results are: Forecast from Method 1 Forecast from Method 2 Realized Value 223 210 256 289 320 340 430 390 375 134 112 110 190 150 225 550 490 525 Compare the effectiveness of these methods by computing the MSE, the MAD, and the MAPE. Do each of the measures of forecasting accuracy indicate that the same forecasting technique is best? If not, why?

Forecast Method 1 Forecast Method 2 MSE 1523.5 1599.167 MAD 37.166 32.166 MAPE 0.141 0.116 No. There is no major difference between the results obtained from either method. MSE for method 1 is better as it shows less error value. MAD for method 2 is better as it shows less error value. MAPE for method 2 is better as it shows less error value. Therefore, different forecasting methods can yield more efficient results. 4. N&O: Chapter 2, #19. (15 points) Parts (a) through (c) are based on the following observations of the demand for a certain part stocked at a parts supply depot during the calendar year. Month Demand Month Demand January 89 July 223 February 57 August 286 March 144 September 212 April 221 October 275 May 177 November 188 June 280 December 312 a. Using a four-month moving average, determine the one-step-ahead forecasts for July through December. One-Step-Ahead July 205.5 Avg(280+177+221+144)/4 August 225.5 Avg(223+280+177+221)/4 September 241.5 Avg(286+223+280+177)/4 October 250.25 Avg(212+286+223+280)/4 November 249 Avg(275+212+286+223)/4 December 240 Avg(188+275+212+286)/4 b. Using a four-month moving average, determine the two-step-ahead forecasts for July through December. (Hint: the two-step-ahead forecast for July is based on the observed demands in February through May.) Two-Step-Ahead July 149.75 Avg(57+144+221+177)/4 August 205.5 Avg(144+221+177+280)/4 September 225.5 Avg(221+177+280+223)/4 October 241.5 Avg(177+280+223+286)/4

b. Repeat the calculation in part (a) for the value of α = .40. What difference in the forecasts do you observe? Forecast α = 0.40 January 25 February 0.40*23.3+0.60*25 24.32 March 0.40*72.3+0.60*24.32 43.512 April 0.40*30.3+0.60*43.512 38.2272 May 0.40*15.5+0.60*38.227 2 29.13632 c. Compute the MSEs for the forecasts you obtained in parts (a) and (b) for February through April. Which value of α gave more accurate forecasts, based on the MSE? MSE = 0.15 MSE = 0.40 February 2261.478025 2302.0804 March 2.490873062 174.556944 April 260.5484258 516.5256198 841.5057746 997.7209879 MSE 0.15 = 841.5057746 MSE 0.40 = 997.7209879 α = .15 gives a more accurate forecast, giving less error than when α = 0.40.