A key factor for success for a retailer is a phenomenal forecasting process and resources (Jack  Barker, 2015) because forecasting is a fundamental part of Spar Group Limited supply chain  operations. To assist in leveraging this key factor, Spar Group Limited develop protocols for forecasting, and select a forecasting team with representatives from all the trading partners and  stakeholders. Spar uses forecasting systems to provide a clear and actionable path for business  activities, this helps the business to conquer certain market challenges (Graham O’Conner, 2018). Spar’s production forecast and scheduling process are broken down into two parts: planning,  based on a monthly forecast, of assembly and components orders and daily scheduling of  packaging custom products and sterilization based on finished goods inventory levels. During the fourth quarter of each fiscal year, Spar’s marketing and finance teams determine the  annual forecast. The annual forecast is broken down based on proportionately, based on the  number of weeks in the month, into monthly forecasts. This is a form of a qualitative approach to  forecasting. As the year progresses, the forecasting team works with the marketing team to make  forecast adjustments according to market trends and events in the food retail industry. Based on  these marketing trends and events an annual demand forecast report is produced and is used by  the finance team to compile an expected/forecast annual revenue. At the beginning of each  month, the month’s forecast is adjusted and agreed upon. The planning of assembly for Spar  products begins with a monthly demand forecast. Based on the month’s forecast, the central planners determine the amount of product that needs  to be transferred from bulk inventory into finished goods inventory to meet the expected demand.  Production forecast and replenishment orders are based on monthly demand forecast and current  inventory levels. By mid-month, the completed monthly plans, which contain the monthly forecast,  are sent to the production business unit. A planner in the business unit plugs the forecasts into a  Material Requirement Planning (MRP) system, which determines weekly production schedules and orders for each finished goods, thus making it easier to meet expected customer demand. Spar also  incorporates a time series forecasting model to their material, processes and demand forecast.  Based on consumer’s past purchasing patterns spar knows it needs to maintain a safety stock policy  of three weeks to satisfy forecasted demand. Spar uses a phenomenal technique and philosophy for their forecasting, however there is still room  for improvement. As a recommendation the retail should not forecast long term but rather shortterm since short term forecast are more accurate. The aggregate forecasts are generally more  accurate than individual stand-alone forecasts due to a lower standard of deviation. Explain any two inventory costs in relation to Spar. Note: you are required to provide a paraphrased understanding of the  inventory costs before providing an application point for each.

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
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A key factor for success for a retailer is a phenomenal forecasting process and resources (Jack 
Barker, 2015) because forecasting is a fundamental part of Spar Group Limited supply chain 
operations. To assist in leveraging this key factor, Spar Group Limited develop protocols for
forecasting, and select a forecasting team with representatives from all the trading partners and 
stakeholders. Spar uses forecasting systems to provide a clear and actionable path for business 
activities, this helps the business to conquer certain market challenges (Graham O’Conner, 2018).
Spar’s production forecast and scheduling process are broken down into two parts: planning, 
based on a monthly forecast, of assembly and components orders and daily scheduling of 
packaging custom products and sterilization based on finished goods inventory levels.
During the fourth quarter of each fiscal year, Spar’s marketing and finance teams determine the 
annual forecast. The annual forecast is broken down based on proportionately, based on the 
number of weeks in the month, into monthly forecasts. This is a form of a qualitative approach to 
forecasting. As the year progresses, the forecasting team works with the marketing team to make 
forecast adjustments according to market trends and events in the food retail industry. Based on 
these marketing trends and events an annual demand forecast report is produced and is used by 
the finance team to compile an expected/forecast annual revenue. At the beginning of each 
month, the month’s forecast is adjusted and agreed upon. The planning of assembly for Spar 
products begins with a monthly demand forecast.
Based on the month’s forecast, the central planners determine the amount of product that needs 
to be transferred from bulk inventory into finished goods inventory to meet the expected demand. 
Production forecast and replenishment orders are based on monthly demand forecast and current 
inventory levels. By mid-month, the completed monthly plans, which contain the monthly forecast, 
are sent to the production business unit. A planner in the business unit plugs the forecasts into a 
Material Requirement Planning (MRP) system, which determines weekly production schedules and
orders for each finished goods, thus making it easier to meet expected customer demand. Spar also 
incorporates a time series forecasting model to their material, processes and demand forecast. 
Based on consumer’s past purchasing patterns spar knows it needs to maintain a safety stock policy 
of three weeks to satisfy forecasted demand.
Spar uses a phenomenal technique and philosophy for their forecasting, however there is still room 
for improvement. As a recommendation the retail should not forecast long term but rather shortterm since short term forecast are more accurate. The aggregate forecasts are generally more 
accurate than individual stand-alone forecasts due to a lower standard of deviation.

Explain any two inventory costs in relation to Spar.

Note: you are required to provide a paraphrased understanding of the 
inventory costs before providing an application point for each.

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