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4 questions in total. I will show one of the problems, and the rest I will show in the form of a document.
Oscar Thompson is the CEO of Oscar’s Manufacturing, a company that makes various components for its wireless technology division.In all, the company makes about 200 different items.The two markets (the major manufacturer and replacement market) require somewhat different handling.For example, replacement products must be packaged individually whereas products are shipped in bulk to the major manufacturer.
The company does not use forecasts for production planning.Instead, the operations manager decides which items to produce, and the batch size, based partly on orders, and the amounts in inventory.The products that have the fewest amounts in inventory get the highest priority.Demand is uneven, and the company has experienced being overstocked on some items and out of stock on others.Being understocked has occasionally created tensions with the manger of retail outlets.Another problem is that prices of raw materials have been creeping up, although the operations manager thinks that this might be a temporary condition.
Because of competitive pressures and falling profits, Oscar Thompson has asked the Operations Manager to undertake a number of changes.One change is to introduce more formal forecasting procedures in order to improve production planning and inventory management.With that in mind, the manager wants to begin forecasting for two products.These products are important for several reasons.First, they account for a disproportionately large share of the company’s profits.Second, the manager believes that one of these products will become increasingly important to future growth plans; and third, the other product has experienced periodic out-of-stock instances.The manager has compiled data on product demand for the two products from order records for the previous 14 weeks.These are shown in the following table:
* unusual order due to overstocking at customer’s warehouse
- What are some of the potential benefits of a more formalized approach to forecasting?Provide 5 benefits.
- Using the above data for weeks 1-14 for products 1 and 2, prepare forecasts for weeks 15 – 18 for each of the products by doing the following:
- Plot the data for the first 14 weeks and present separate graphs for product 1 and for product 2 (this will show the behavior of your data for weeks 1 to 14 for each product)