Explain the assumptions behind the centre-of-gravity method

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Reference no: EM13224236

Question:

Part A:

The Carbondale Hospital is considering the purchase of a new ambulance. The decision will rest partly on the anticipated mileage to be driven next year. The miles driven during the past 5 years are as follows:

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a) Forecast the mileage for next year using a 2-year moving average.

b) Find the MAD based on the 2-year moving average forecast in part (a).

c) Use a weighted 2-year moving average with weights of .4 and .6 to forecast next year's mileage. (The weight of .6 is for the most recent year.) What MAD results from using this approach to forecasting? (Hint: You will have only 3 years of matched data.)

d) Compute the forecast for year 6 using exponential smoothing, an initial forecast for year 1 of 3,000 miles, and α = 0.3.

e) In addition to mileage what other factors would you consider to make a decision whether a new ambulance should be purchased?

Part B:

The following table gives the map coordinates and the shipping loads for a set of cities that we wish to connect through a central hub.

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a) Near which map coordinates should the hub be located?

b) If the shipments from city A triple, how does this change the coordinates? PX

c) Explain the assumptions behind the centre-of-gravity method. How can the model be used in a service facility location?

Reference no: EM13224236

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