Forecasting Demand

FORECASTING

THE UNIVERSITY BOOKSTORE STUDENT COMPUTER PURCHASE PROGRAM

The University Bookstore is owned and operated by State University through an independent corporation with its own board of directors. The bookstore has three locations on or near the State University campus. It stocks a range of items, including textbooks, trade books, logo apparel, drawing and educational supplies, and computer and related products such as printers, modems, and software. The bookstore has a program to sell personal computers to incoming freshmen and other students at a substantial educational discount partly passed on from computer manufacturers. This means that the bookstore just covers computer costs with a very small profit margin remaining.

Each summer all incoming freshmen and their parents come to the State campus for a 3-day orientation program. The students come in groups of 100 throughout the summer. During their visit the student and their parents are given details about the bookstore’s computer purchase program. Some students place their computer for the fall semester at this time, while others wait until later in the summer. The bookstore also receives orders from returning students throughout the summer this program presents a challenging supply chain management problem for the bookstore. Orders come in throughout the summer, many only a few weeks before school starts in the fall, and the computer suppliers require at least 6 weeks for delivery. Thus, the bookstore must forecast computer demand to build up inventory to meet student demand in the fall. The student has repercussions all along the bookstore supply chain. The bookstore has a warehouse near campus where it must store all computers since it has no storage space at its retail locations. Ordering too many computers not only ties up the bookstore’s cash reserves, but also takes up limited storage space and limits inventories for other bookstore products during the bookstore’s busiest sales...