Question

In: Operations Management

ABC Company in southwest UK manufactures leather lacing and kits. It consists of 5 Leather Factory...

ABC Company in southwest UK manufactures leather lacing and kits. It consists of 5 Leather Factory stores of, which three are located in the UK and others are located in Europe. Recently the overall demand for its products has declined. Therefore, intermediate-term attempts to control costs have centered on forecasting demand and reducing inventory costs. To help ABC Company better manage its resources and more effectively respond to demand, management team is considering ways to improve its planning process by finding demand/inventory management methods that can reasonably predict demand six to eight weeks into the future, and establishing procedures for managing inventory costs.

  • Of the time series models (including the moving average and weighted moving average, and exponential smoothing) which one do you consider ABC Company may use? Why?

Solutions

Expert Solution

According to the data given,ABC company will adopt EXPONENTIAL SMOOTHING METHOD.

Exponential smoothing is a time series forecasting method for univariate data.

Exponential smoothing forecasting methods are similar in that a prediction is a weighted sum of past observations,but the model explicitly uses an exponentially decreasing weight for past observations.

Because it is a technique that uses a smoothing constant as a predictor of future forecasting .Whenever you use a number in forecasting that is an average,it has been smoothed.

The controlling input of the exponential smoothing calculation is known as the smoothing factor.It essentially represents the weighting applied to the most recent period's demand.

SOME METHODS OF DEMAND FORECASTING ARE:

  • Survey of buyer's choice
  • Collective opinion method
  • Barometric Method
  • Expert Opinion Method
  • Statistical Methods

Why ABC Company prefer this method is ,they need to manage inventory cost and increase their demands.So this will help them to manage so.

Some common methods to increase demand are:

  • Enhancements.One way to increase product demand is to offer something your market values
  • Promotions
  • In-Store Demonstrations
  • Price Reductions.

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