Our reading this week emphasizes the role of demand management in creating a coordinated flow of demand across the supply chain. Experience shows that selecting the best method of estimating demand will vary with the maturity of the business and the data available. Address the following:
- A start-up alternative fuel automobile company has a first year market forecast of 1000 units. Identify the forecasting model that is in use here and explain why it is the obvious choice.
- During its first three full years of operation the automobile company had actual sales of:
- Year One: 800 units
- Year Two: 1200 units
- Year Three: 2000 units
- Using a simple three year moving average, calculate the predicted demand for Year Four. Explain your reasoning.
- The sales department expects the growth in Year Four to more closely resemble the average growth experienced in the last two years. Predict the number of units expected in Year Four. Discuss whether you would recommend this quantity as the manufacturing plan or the quantity found using the simple three year moving average in step two and why.
- In Year Three, one fourth of the production was sold in China. The marketing department has just learned of a new tax that will be imposed on all luxury imports into China beginning in Year Four. It is expected that this will decrease sales to China by 50%. Apply this market intelligence to the simple three year moving average method discussed in step two and recalculate the predicted demand for Year Four. Explain how you arrived at your answer.