Forecasts based on advance demand information, Corporate Finance

Assignment Help:

The case company combines SKUs into product groups and product groups into assortment groups. The methods based on advance demand information (Methods 1-3) can therefore be on a product group level, on an assortment level, or for all assortment groups together. We tested all three ways for all three methods, and for each method it turned out that forecasting on a product group level provided the best results (and for all SKUs together the worst). Therefore, we will only report the results on a product group level.

We remark that the ongoing policy of the company was actually to produce forecasts based on advance demand information, but on an assortment group level. Their method used a combination of the rules for dividing group demand (i.e. for calculating fn; n 2N)of Methods 1 and 2. It applied a different way of estimating group demand M. Instead of using (1), a planning committee consisting of mainly purchasers had to reach a consensus, also taking budget restrictions into account. Since the resulting forecasts have not been recorded, they cannot be compared to those of other methods in our empirical investigation. We do remark that letting budget restrictions play a role in forecasting obviously carries the risk of underestimations to stay within budget or over-estimations to avoid losing part of the budget (in future years).

Since having a top, mid and flop class is intuitively most appealing, only results for three categories are presented. We also tested the top-flop method with varying class sizes. However, again, this did not (signi?cantly) improve the performance. Therefore, we report results for equal-sized classes only. We note that contrary to ABC inventory classi?cation, where class A SKUs typically get special attention and their number therefore needs to be limited, class sizes do not affect the complexity of applying the top-flop method.


Related Discussions:- Forecasts based on advance demand information

Case Study, B. Zehpher Intelligence A second possible Acquisition, Zehpher ...

B. Zehpher Intelligence A second possible Acquisition, Zehpher Intelligence, an IT company is operating in a rapid growth industry. Relevant financials: Free cash flow for the pa

Capital budgeting, Ask question #A machine has a cost of $180. It will have...

Ask question #A machine has a cost of $180. It will have a life of 3 years, and will be depreciated straight line to zero salvage value. It will result in sales revenue of $200 per

Evaluate accounting method, Question 1: Collect a current annual report (2...

Question 1: Collect a current annual report (2009) of an Australia listed company. Select the firm that reported the following assets. Select BOTHtypes of assets. Proper

Market efficiency, differentiate between allocative efficiency and pricing ...

differentiate between allocative efficiency and pricing efficiency

Find the expected return and standard deviation, Question: (a) You are...

Question: (a) You are given the following information on two risky assets A and B. E(X) = 25% E(Y) = 30% Var (X) = 16% Var (Y) = 49% The correlation matr

LEVERAGE, what will be impact on the operating leverage of a firm if it pr...

what will be impact on the operating leverage of a firm if it proceeds for additional borrowings

Answer required ., What will be impact on the operating leverage of a firm,...

What will be impact on the operating leverage of a firm, if it proceeds for additional borrowings?

Balance scorecard, hey i need help creating a balance scorecard how long wi...

hey i need help creating a balance scorecard how long will that take >>?

Mncs do increase their risk by borrowing foreign currencies, According to t...

According to those who are in favor of borrowing, the MNCs can achieve lower financing costs and hence their competing ability is improved. But according to the international fishe

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd