How Does Improved Supply Chain Visibility Improve the Planning Process?


Identify and discuss the major forecast components



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Study Questions

1.How does improved supply chain visibility improve the planning process?


2.Describe the S & OP process.What are the major trade offs must be considered.


3.Identify and discuss the major forecast components. Why is it important to decompose demand into these components when developing new forecasts?


4.Compare and contrast time series and causal forecast techniques. Under what condi­tions would each be appropriate?


5.Discuss how a minor change in demand at the retail level can significantly impact sup­ply chain variation at distributors, manufacturers, and suppliers.


6. Describe the major components of an advanced planning and scheduling system.What are  the major challenges in implementing such a system.


Challenge Questions 

1.Advanced planning and scheduling can be completed at a firm, divisional, or geo­graphic level. Describe the challenges and benefits for each strategy. rn what situations would you recommend that a firm implement APS at a firm, divisional, or geographic level and why?


2.CPFR has been shown to improve forecasting accuracy for manufacturers. What are the major challenges associated with using CPFR? Given its demonstrated benefits, discuss when CPFR should or should not be used by firms.


3.The chapter describes a situation where Whirlpool and Lowe’s are collaborating to jointly developing a merchandizing and operations plan. What are the benefits and risks to each organisation? What are the challenges to Whirlpool, as it has other major cus­tomers to consider?


4.Assume that effective forecasting requires a combination of technique, system support, and administration. Your supervisor in your consumer products firm has requested that you identify some initiatives to enhance forecast accuracy. What specific initiatives would you recommend for consideration regarding the technique, system support, and administration components?


True /False Choice

Identify (circle) TRUE/FALSE choice that best completes the statement or answers the following:

1. It has been clearly demonstrated that quantitative techniques of forecasting always result in less forecast error than qualitative techniques.

True /False


2. To effectively implement Sales and Operations Planning, sales and marketing people should develop marketing plans based on their forecast of demand while operations should develop the production plan based on their own forecast of demand.

True / False


3. S&OP is a process that applies only to manufacturing organisations.

True/ False


4. Good supply chain visibility is achieved when a firm is able to identify its shipments and its inventory.

True /False


5. S&OP is primarily concerned with implementation of advanced planning information technology.

True / False


6. To insure that S&OP is most effectively implemented, a company should establish a specific department charged with S&OP responsibility.

True / False


7. CPFR involves joint planning of forecasts between customers and suppliers.

True / False


8. A company that has a responsive supply chain capability is less reliant on forecasting than a company that has an anticipatory supply chain.

True / False


9. Of the various components of a forecast, the most controllable are the promotional component.

True / False


10. Use of statistical forecasting techniques removes the need for managerial judgment in forecasting.

True / False


Problem Set 1: Information and Forecasting problems 1 through 6.

1.Mike McNeely, logistics manager for the Illumination Light Company, has considered replacing the firm’s manual customer order management system with electronic ordering  a Web-based application. He estimates the current system, including labour, costs $2.50/order for transmission and processing when annual order volume is under 25,000. Should the order volume equal or exceed 25,000 in any given year, Mr. McNeely will have to hire an additional customer service representative to assist order reception in the manual process? This would raise the variable cost to $3.00/order. He has also esti­mated the rate of errors in order placement and transfer to be 12/1,000 orders.

A Web-based application would cost $100,000 upfront to implement and variable costs are determined to be $.50/order regardless of volume. A Web-based application could acquire and maintain order information with an error rate of 3/1,000 orders. A Web-based specialist would be required to maintain the system at all times as well. Her salary is $38,000 in the first year and increases 3 percent each year thereafter.

Order errors cost $5.00 per occurrence on average to correct in the manual system. Web-based errors cost $8.00 on average to correct since the specialist inspects the sys­tem for flaws on most occasions.

a)If the firm expects order volume over the next five years to be 20,000, 22,000, 25,000, 30,000, and 36,000 annually, would a Web-based system pay for itself within the first five years?

b)What effects aside from cost might Mr. McNeely consider when implementing a web-based solution?


2.Mr. McNeely currently batches orders for processing under the manual order man­agement system. The orders are batched for daily processing. If Mr. McNeely opts to implement a Web-based solution, might this affect his current means of order process­ing? If so, how?


3.Quality Marketing Technologies, Inc., has hired you as a sales representative. You have been asked to call on Quickie Stop, a small convenience store chain with five locations in your region. What benefits of UPC and bar coding applications might you illustrate to encourage Quikee Stop to utilise these technologies to track sales at its retail outlets?


4.Comfortwear Hosiery, Inc., produces men’s socks at its manufacturing facility in Topeka, Kansas. The socks are stored in a warehouse near the factory prior to distribu­tion to distribution centre (DC) locations in Los Angeles, Memphis, and Dayton. The warehouse uses a top-down forecasting approach when determining the expected quan­tities demanded at each DC.

The aggregate monthly forecast for June is 12,000 pairs of socks. Historically, the Los Angeles DC has demanded 25 percent of the warehouse’s stock. Memphis and Dayton have demanded 30 percent and 35 percent, respectively. The remaining 10 per­cent is shipped directly from the warehouse.

a)Based on the aggregate forecast, how many pairs of socks should you expect each DC to demand in June?

b)Suppose the aggregate forecast for July results in a 6 percent increase over June’s How many pairs of socks would each DC anticipate in July?


5.Ms. Kathleen Boyd, director of logistics for the Scenic Calendar Company, wishes to evaluate two methods of time series forecasting. She has collected quarterly calendar sales data from the years 2008 and 2009


a)Use the moving averages technique to find forecasted sales for the third quarter of 2009 based on actual sales from the previous three-quarters.

b)Use simple exponential smoothing to forecast each quarter’s sales in 2009, given that Boyd qualitatively forecasted 900 calendars for quarter 4, 2008. Ms. Boyd has assigned an alpha factor of .1 for time series sensitivity.

c)Repeat the simple exponential smoothing problem above (part 5b) with Ms. Boyd employing an alpha factor of .2.

d)How well do the moving averages and simple exponential smoothing techniques seem to work in Ms. Boyd’s situation? In what ways do the techniques appear to fail?


6.Michael Gregory, logistics manager of Muscle Man Fitness Equipment, has determined that his current forecast system for national sales has historically shown a 20 percent error rate. Due to this level of error, Muscle Man’s DC managers maintain inventory at their locations costing the company, on average, $3,000 per month.

By improving his forecast methodology and shortening forecast horizons, Mr. Greg­ory anticipates cutting the error level down to 12 percent. With improved forecast­ing, Muscle Man’s DC managers have indicated that they feel comfortable with lower inventory levels. Mr. Gregory anticipates monthly inventory carrying cost reductions of 40 percent.

a)If the forecast system improvement will cost $1,000 more per month than the old system, should Mr. Gregory implement the change?

b)Why might Muscle Man’s customers encourage the firm to improve its forecasting capabilities?


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