Reference no: EM132440761
Echlin Inc. is an after-market supplier of automotive spare parts. 10 A part is usually made specifically for a particular model of a car. In order to forecast the demand for a part, Echlin tries to use the following process: (a) determine the total number of new vehicles using this part sold each year, (b) determine the replacement probability by age for the first replacement, second replacement, and so on of the part for current and future years, ( c) calculate the total number of replacement units for each year, ( d) break this down into original equipment manufacturer market and after-market manufacturer market, (e) calculate Echlin's annual share using its market share, and, finally (f) break down the annual forecast into quarterly and monthly sales forecasts using seasonal relatives. Consider a specific part. Echlin makes brake calipers for a particular car model first introduced in 1986. Suppose it is now the end of 1992 and, using steps a to e above, Echlin has forecasted its own sales of this caliper for 1993.
Year Echlin's Sales of Calipers
1990 10,444
1991 10,319
1992 8,477
1993 6,334 (forecast)
Echlin also has quarterly sales of these calipers for the past three years.
Quarter 1990 1991 1992
Q1 2,370 2,641 2,281
Q2 2,058 2,198 1,814
Q3 2,778 2,518 2,127
Q4 3,238 2,962 2,255
Total 10,444 10,319 8,477
a. Use the 1990-92 quarterly data above to determine the quarterly seasonal relatives.
b. Use your answer to part a and 1993 forecast sales (6,334 units) to forecast quarterly sales for 1993.
c. Deseasonalize the data, fit an appropriate model to the deseasonalized data, project it four quarters ahead, and reseasonalize the projections to forecast quarterly demand in 1993. Contrast your results with part b.