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ASSIGNMENTS FOR LOGISTICS AND SUPPLY CHAIN MANAGEMENT ASSIGNMENT MODULE 2 Question: What kind of forecasting methods do you

u think a company with the following products would use. For each product take up a company of your choice and justify the use of particular forecasting method for that company. Answer: Forecasting is based on a number of assumptions: 1. 2. 3. 4. The past will repeat itself. As the forecast horizon shortens, forecast accuracy increases. Forecasting in the aggregate is more accurate than forecasting individual items. Forecasts are seldom accurate.

It is through a combination of methods that a company arrives at an estimate regarding the future demand and this estimate forms the basis of the supply chain activities including production. One single method may not be the exact solution for a product in different scenarios. Like the method for a product which is at the fag end of its life cycle may not be the same for a new brand the company plans to launch. However given below is a list of products from different companies and the demand forecasting methods which I think is the best suited for each of them:PRODUCT Soft Drinks SUGGESTED FORECASTING METHOD WITH JUSTIFICATIONS PepsiCo Market Research is my suggestion for this category. Each one has their own preferences when it comes to different products (E.g. I prefer the brand Nescafe when it comes to instant coffee). By way of market research, these consumer preferences are ascertained which in turn forms the basis of a forecast. This technique is extensively used prior to the launch of a new product. In case of an already existing product this technique may be complimented by sales force estimate and moving average technique to arrive at a more precise forecast. Colgate Palmolive I suggest Moving Average in general and Exponential smoothing method in particular for this product of Colgate Palmolive. A number of data may be registered with a weightage to the recent data and using a formula, the future demand is calculated. Moving average will not give an accurate prediction for other less established products, as it gives recent data more importance. A product like Colgate tooth paste which has established itself over the years can afford to adopt Moving Average Technique to arrive at a COMPANY

Tooth Paste

Laptop

Dell

Mobile

Nokia

Air conditioner

Blue Star

quick forecast, as the input data would not vary much over a considerable period. However, for more important strategic decisions the suggested method is Exponential Smoothing. Comparison of the performance of a similar successful product and research on why a particular brand fared poor will give valuable inputs to arrive at a demand forecast. Historical Analogy is the suggested method for this product. In case of a new product launch other qualitative methods may also provide useful inputs for a precise forecast. I suggest Historical Analogy for this product. This is a common technique used to generate new product forecasts when a similar product exists. Electronics and telecommunication companies often utilize this technique. E.g. The demand for a new cell phone could be based upon the sales history of an existing model. Qualitative Methods like market research, Delphi technique etc. and causal method like life cycle analysis may be adopted in case of a new product launch. To assess the demand of an existing brand, moving average method and exponential smoothing may also be studied. In this case the demand fluctuates according to seasons and weather. So the methods suggested are Trend projection, seasonality etc. A look at the last seasons sales will also help to make the forecast precise. So I would suggest the input-output method too.