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Forecasting problem: Excel modules

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11-13

Data collected on the yearly demand for 50-pound bags of fertilizer at Wallace Garden Supply are shown in the following table:
Year Bags (in thousands) Year Bags (in thousands)
1 4 7 7
2 6 8 9
3 4 9 12
4 5 10 14
5 10 11 15
6 8

a) develop two-year, three-year, and four-year moving averages to forecast demand in year 12.
b) Forecast demand with a three-year weighted moving average in which demand in the most recent year is given a weight of 2 and demands in the two years are each given a weight of 1.
c) Forecast demand by using exponential smoothing that the forecast for year 1 is 5,0000 bags to begin the procedure.
d) Which of the methods analyzed here would you use. Explain your answer.
Answers for above:
A) MAPE2-MA =22.57%, MAPE3-MA =22.92%, MAPE4-MA =27.07%.
B) MAPE3-WMA = 21.17%.
C) MAPE2-MA =25.50%
3-PERIOD SEEMS TO BE THE BEST, BUT WHY?

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12-16 Barbara Bright is the purchasing agent for West Valve Company. West Valve sells industrial valves and fluid control devices. One of the most popular valves is the Western, which has an annual demand of 4,000 units. The cost of each valve is $90, and the inventory carrying cost is estimated to be 10% of the cost of each valve. Barbara has made a study of the costs involved in placing an order for any of the valves that West Valve stocks, and she has concluded that the average ordering cost is $25 per order. Furthermore, it takes about two weeks for an order to arrive from the supplier, and during this time the demand per week for West valves is approximately 80. Compute the EOQ, ROP, optimal number of orders per year, and total annual cost for Western valves.

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