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IELM 310 Assignment I Due Date: September 22nd, 2005

Assignment I is related to forecast and aggregate planning, including the following five questions from the textbook by Nahmias (Fifth Edition):

1. Problem 24 at Page 72

Observed weekly sales of ball peen hammers at the town hardware store over an eight-week period have been 14,9,30,22,34,12,19,23.

a. Suppose that three-week moving averages are used to forecast sales. Determine the one-step-ahead forecasts for weeks 4 through 8.

b. Suppose that exponential smoothing is used with a smoothing con-

stant of α = 0.15. Find the exponential smoothing forecasts for weeks

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through 8. [To get the method started, use the same forecast for week

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as you used in part (a).]

c.

Based on the MAD, which method did better?

d.

What is the exponential smoothing forecast made at the end of week

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for the sales in week 12?

2. Problem 30 at Page 77;

For the data in Problem 28, use the results of the regression equation to estimate the slope and intercept of the series at the end of June. Use these numbers as the initial values of slope and intercept required in Holt’s method. Assume that α = 0.15, β = 0.1 for all calculations.

Table 1: Data in Problem 28

Month

Number of Patrons

Month

Number of Patrons

Jan.

133

Apr.

640

Feb.

183

May

1,876

Mar.

285

Jun.

2,550

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a. Suppose that the actual number of visitors using the park in July

was 2,150 and the number in August was 2,660. Use Holt’s method to

update the estimates of the slope and intercept based on these obser-

vations.

b. What are the one-step-ahead and two-step-ahead forecasts that Holt’s method gives for the number of park visitors in September and October?

c. What is the forecast made at the end of July for the number of park attendees in December?

3. Problem 49 at Page 101;

The owner of a small brewery in Milwaukee, Wisconsin, is using Win- ter’s method to forecast his quarterly beer sales. He has been using smoothing constants of α = 0.2, β = 0.2, γ = 0.2. He has currently ob- tained the following values of the various slope, intercept, and seasonal factors: S 10 = 120, G 10 = 14, c 10 = 1.2, c 9 = 1.1, c 8 = 0.8, c 7 = 0.9.

a. Determine the forecast for beer sales in quarter 11.

b. Suppose that the actual sales turn out to be 128 in quarter 11. Find

S 11 and G 11 , and find the updated values of the seasonal factors. Also determine the forecast made at the end of quarter 11 for quarter 13.

4. Problem 32 at Page 148;

The Paris Paint Company is in the process of planning labor force re- quirements and production levels for the next four quarters. The mar- keting department has provided production with the following forecasts of demand for Paris Paint over the next year:

Assume that there are currently 280 employees with the company. Em- ployees are hired for at least one full quarter. Hiring costs amount to $1,200 per employee and firing costs are $2,500 per employee. Inven- tory costs are $1 per gallon per quarter. It is estimated that one worker produces 1,000 gallons of paint each quarter.

Assume that Paris currently has 80,000 gallons of paint in inventory and would like to end the year with an inventory of at least 20,000

gallons.

a. Determine the minimum constant workforce plane for Paris Paint

and the cost of the plan. Assume that stock-outs are not allowed.

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Table 2: Data in Problem 32

Quarter

Demand Forecast (in thousands of gallons)

1

380

2

630

3

220

4

160

b. Determine the zero inventory plan that hires and fires workers each

quarter to match demand as closely as possible and the cost of that

plan.

c. If Paris were able to back-order excess demand at a cost of $2 per

gallon per quarter, determine a minimum constant workforce plan that

holds less inventory than the plan you found in part (a), but incurs stock-outs in quarter 2. Determine the cost of the new plan.

5. Problem 34 (only part a is required) at page 148.

Formulate Problem 32 as a linear program. Assume that stock-outs are not allowed. Be sure to define all variables and include all the required

constraints.

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