Question

3) The following gives the number of pints of type B blood used at Woodlawn Hospital in the past 6 weeks:

WEEK OF	PINTS USED
August 31	360
September 7	389
September 14	410
September 21	381
September 28	368
October 5	374

1. Forecast the demand for the week of October 12 using a 3-week moving average.

2. Compute the forecast for the week of October 12 using exponential smoothing with a forecast for August 31 of 360 and α = .2

5) Southeastern Bell stocks a certain switch connector at its central warehouse for supplying field service offices. The yearly demand for these connectors is 15,000 units. Southeastern estimates its annual holding cost for this item to be $25 per unit. The cost to place and process an order from the supplier is $75. The company operates 300 days per year, and the lead time to receive an order from the supplier is 2 working days.

a) Find the economic order quantity

b) What is the reorder point?

Answer 1

3.a

3-week moving average forecast for the week of October 12 = ( Pints used in the week of September 21 + Pints used in the week of September 28 + Pints used in the week of October 5) / 3

= ( 381 + 368 + 374) / 3

= 1123/ 3

= 374.33

3.b

Exponential smoothing forecast for week (n +1) = ( α x Pints used in Week n) + ( (1 - α) x Forecast for Week n)

α = 0.2

Forecast for the week of August 31 = 360

Using the above formula, the exponential smoothing forecasts are calculated as per the below table:

WEEK OF	PINTS USED	Forecast
Aug-31	360	360.00
Sep-07	389	360.00
Sep-14	410	365.80
Sep-21	381	374.64
Sep-28	368	375.91
Oct-05	374	374.33
Oct-12		374.26

Therefore, Exponential Smoothing forecast for the week of October 12 = 374.26

5.a.

Annual Demand = D = 15000 units

Ordering cost = S = $ 75

Holding cost = H = $ 25

Economic Order Quantity = √ (( 2 x D x S) / H)

= √ (( 2 x 15000 x 75) / 25)

= √ (2250000 / 25)

= √ 90000

= 300 units

5.b

Annual demand = 15000 units

Since the company operates 300 days in a year, Daily demand = 15000 / 300 = 50 units

Lead time = 2 days

Reorder point = Daily demand x Lead time = 50 x 2 = 100 units