Chapter 8, Problem 24P

The Midwest Computer Company serves a large number of businesses in the Great Lakes region. The company sells supplies and replacements and performs service on all computers sold through seven sales offices. Many items are stocked, so close inventory control is necessary to assure customers of efficient service. Recently, business has been increasing, and management is concerned about stockouts. A forecasting method is needed to estimate requirements several months in advance so that adequate replenishment quantities can be purchased. Ami example of the sales growth experienced during the last 50 months is the growth in demand for item EP-37, a laser printer cartridge, shown in Table 8.3.

1. Develop a trend projection with regression solution using OM Explorer. Forecast demand for month 51.
2. A consultant to Midwest’s management suggested that new office building leases would be a good leading indicator for company sales. The consultant quoted a recent university study finding that new office building leases precede office equipment and supply sales by 3 months. According to the study findings, leases in months 1 would affect sales in month 4, leases in months 2 would affect sales in month 5, and so on. Use POM for Windows’ linear regression module to develop a forecasting model for sales, with leases as the independent variable. Forecast sales for month 51.





3. Which of the two models provides better forecasts? Explain.