Scenario
For this assessment, suppose that you are the operations manager for ABC Manufacturing, a small manufacturing company founded three years ago.
ABC has been manufacturing and selling an electric motor for the past year, but the company has not always had sufficient workers assigned to manufacturing this electric motor in order to satisfy demand. ABC's president asked you to plan for the production of this motor for the next six months.
You have decided you will use a level aggregate plan for the electric motor, meaning that you will manufacture the same number of units each month. ABC's president has told you that some customers order this motor well in advance of when needed, and thus it is allowable to have backorders, if needed.
You know there are currently 150 units in inventory (starting inventory = SI), and ABC's marketing manager estimates that the demand for the motor (in units) for each of the next six months (M = 6) will be 240, 225, 265, 270, 260, and 275 (D1, D2, D3, D4, and D5 respectively).
You have decided you would like to reduce average inventory level of several products (including this one), and you want to have 50 units in inventory six months from now (ending inventory = EI).
Question 5. Historically, ABC has based its production on estimates from the company's marketing manager. While that has generally been successful, you have decided you would like to factor in an operations management approach to estimating demand.
Describe the following forecasting methods. Provide the math associated with each method and identify the pros and cons of using it:
Naïve.
Simple mean.
Simple moving average.
Weighted moving average.
Exponential smoothing.
Linear trend line.