M & L Industry Case Analysis

Custom Forecasting for M&L Manufacturing

Q1. What are some of the potential benefits of a more formalized approach to forecasting?

The potential benefits for M&L manufacturing are:

• Proper production planning in future of two of its most valuable and profitable product lines;

• Fewer stock-outs in retail stores;

• Less uncertainty with regard to unexpected orders and production failures;

• Proper inventory management and control over the stock levels;

• Better knowledge regarding which products to continue selling and discontinue selling.

Q2. Prepare a weekly forecast for the next four weeks of each product. Briefly explain why you chose the methods you used.

Product 1

The demand for product one has risen over the period of 14 weeks which depicts that demand can be expected to rise further in the coming four weeks. The pattern can be illustrated using a line graph, as shown in figure 1, below.

Based on the shape of the graph, it can be stated that, except for the unusual order of 90 units in the seventh week, the demand has risen over the period in a rising trend. Because of the size of the order the graph gets put off from an otherwise linear pattern of the rising demand.

In order to forecast demand of Product, the following features of the demand of the product need to be noted:

• The demand has risen steadily over the period of 14 weeks;

• The slight deviation in between has been caused by an unusual order which is not expected in future sales.

The forecasting method most suited to the nature of the demand of Product 1 is ‘Trend Analysis’ using a regression model. Trend analysis is a method of forecasting whereby the data is assumed to show a linear behaviour over a long period of time and based on the linear nature of the growth in sales, a linear equation, obtained through regression analysis is established to make predictions about sales and demand in future and make...