Week 3 / Demand Forecasting + Inventory

Question 1

Moving Average

Answer 1

(A1 + A2 + A3+ A4…+An) / n

The classic way to calculate an average

Question 2

Weighted moving average

Answer 2

= (A1 x W1) + (A2 + W2) + … (An + Wn)

Question 3

MAD Acronym

Answer 3

Mean Absolute Deviation

Question 4

MSE acronym

Answer 4

Mean Square Error

Question 5

Linear Trend Line

Answer 5

Develops a “line of best fit” amongst the actual observation “data points”

Draw the line in the middle of all the point to the best of your ability. All points will not touch the line

Question 6

Linear Trend Equation

Answer 6

• Fit a trend line to a series of historical data

* Use regression to find the equation of the line (called the Least Squares Line)

Question 7

Equation for a linear line

Answer 7

Yt = a + bt

Orrr Y = mx + b

Question 8

Federated Co-operatives Ltd.

Answer 8

• The largest wholesaler in Canada.
• In 2011, FCL has moved from IBM Inventory and Replenishment Modules (INFOREM) to JDA Demand Forecasting and Replenishment Software.
• They saw a 1.2% increase in service level, 14% decrease in perishability cost.

Question 9

Inventory (what is inventory?)

Answer 9

Stock of items kept for use or sale in the future

Question 10

Decisions of inventory management:

Answer 10

1) How many units to order (quantity)

2) When to order (and when)

Question 11

Independent Demand:

Answer 11

Demand for these items is unknown and has to be forecasted.

Question 12

Dependent Demand

Answer 12

Manufactured parts

Question 13

Independent demand is uncertain.

Dependent demand is ______.

Answer 13

Certain

Question 14

Type of Inventories

Answer 14

1) Spare parts, tools, & supplies
2) Finished-goods (or merchandise)
3) Partially completed items called work in
process (WIP)
4) Raw materials & purchased parts

Question 15

A typical company has approximately _____ of its current assets in inventory

Answer 15

half

Question 16

The major source of revenue for retailers and wholesalers/distributors is the _____ of merchandise (i.e., inventory).

Answer 16

resale

Question 17

_____ companies do not carry as much inventory, although they do carry inventory of supplies and equipment.

Answer 17

Service

Question 18

Objectives

Answer 18

To achieve satisfactory levels of customer service while minimizing inventory costs.

• Level of customer service (not understock)
• Costs of ordering and holding inventory (not overstock)

Question 19

Note: Inadequate management of inventory can result in both _______ of some items and ________ of the others.

Answer 19

understocking

overstocking

Question 20

Inventory Control Systems

Answer 20

1) Periodic Inventory System (Aka Fixed-time-period system)

2) Perpetual Inventory System (Aka Continuous review / Fixed-order-quantity system)

Question 21

1) Periodic Inventory System (Aka Fixed-time-period system)

Answer 21

a physical count of items in inventory is made at periodic, fixed intervals (e.g., weekly, monthly) in order to decide how much to order of each item.

Question 22

2) Perpetual Inventory System (Aka Continuous review / Fixed-order-quantity system)

Answer 22

keeps track of removals from and additions to inventory of each item on a continuous basis, so the system can provide information on the current inventory position for each item at any time.

Question 23

Inventory Tracking Tools

Answer 23

1) Bar code

2) Radio frequency Identification (RFID)

Question 24

1) Bar code

Answer 24

a unique number assigned to an item or a location, made of a group of vertical black and white bars that are read by a scanner.

Question 25

2) Radio frequency Identification (RFID)

Answer 25

is a technology that uses radio waves to identify objects, such as goods in supply chains. This is done through the use of an RFID tag that is attached to an object

Question 26

Purchase lead time

Answer 26

•time interval between ordering and receiving the order

it is important to know the manufacturing lead time, the time it will take for a batch of a part/product to be manufactured

Question 27

Point of Sale (POS) system

Answer 27

•Software for electronically recording actual sales at the time and location of sale

Dons POS

Question 28

One of the most frequently used quantitative tools in academics and practice is

Answer 28

simple linear regression

Question 29

Many are familiar with the term “least squares,” many are under the mistaken impression that the method minimizes the sum of the errors as opposed to the sum of the squared errors

Answer 29

Let’s put the squares in least-squares

Question 30

How to calculate the Error

Answer 30

Demand - Forecast = Error

Example: 622 - 611 = 11

Question 31

Linear Trend (is a subset of linear regression)

Answer 31

Time is the independent variable

Data is the dependent variable

Question 32

Naïve approach

Answer 32

Assuming Forecast 1 is equal to Actual 1

Question 33

MA 2 MA(2)

Answer 33

Leave the first 2 rows blank for data finding

Question 34

LINEST

Answer 34

Y range, X range, True / False, True / False

Having the first spot True = flexible intercept
Having the first spot False = x-intercept is 0

Second True = more information
Second False = only first information (less data)

Question 35

In Canada alone we throw out ____ Billion dollars worth of food a year

Answer 35

31