Operational Research Techniques Assignment - Forecasting and Inventory control

Learning Outcomes -

• Solve a range of business decision problems using appropriate software, analyse the output, and interpret the results in the context.
• Identify and apply appropriate inventory control models.
• Analyse seasonal and non seasonal time series data using appropriate forecasting methods.

Questions -

Q1. A bookstore manager compiled the following sales data for the last three years of bookstore operation.

(a) Use the data obtained in years 2016 and 2017 to determine the initial estimates of level, trend and all seasonal factors. Explain how you calculated the initial estimates.

(b) Use the Exponential Smoothing with Trend and Seasonality to forecast the books' sales on monthly basis in 2018. Assume that smoothing constants for level α, trend β, and seasonality γ, are all equal to 0.3. Implement the method using Excel.

Forecast the book sales for February, 2019.

Select one row in the table which refers to any month in 2018 and explain how you calculated the level, trend and seasonal factor for that month and how you calculated the forecast for the following month. Which formula you used?

Also, explain how you calculated the forecasts for February, 2019 and which formula you used.

Q2. A local university purchases exercise books to give to their students. Instead of a fixed unit cost, their supplier quotes the following discount pricing:

An annual holding cost is estimated to be 20% of the purchase price. The university incurs a fixed order placement, transportation and receiving cost of £100 each time an order is placed, regardless of the order quantity. Annual demand for the exercise books is 10000.

The discount for the 10001-unit minimum order quantity looks tempting. However, realising that higher order quantities result in higher inventory holding cost, the university should prepare a through cost analysis before making a final ordering recommendation.

Determine the quantity of exercise books the university should order each time it makes an order in such a way as to minimise the total cost incurred.