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

Lrr, how do you calculate it

how do you calculate it

How much money saved?, Kristina started setting aside funds three years ago...

Kristina started setting aside funds three years ago to save for a down payment on a house. She has saved $900 each quarter and earned an average rate of return of 4.8 percent. How

Why the discount rate equals opportunity cost of capital, Question: (a)...

Question: (a) Describe why the discount rate equals opportunity cost of capital? (b) "Nominal rate less inflation rate is equal to real rate of return" - Is it true? Why or

Mmtheory, the departure from Modigliani-Miller proposition using the agency...

the departure from Modigliani-Miller proposition using the agency cost and information asymmetry theory of capital structure

Assignments, I need to know about corporate financial analysis

I need to know about corporate financial analysis

Desccribe the determination of foreign exchange rate, Question 1: (a) ...

Question 1: (a) Show that the pricing of Eurocurrency deposits and loans leads to lower profit margin by Eurobanks compared to onshore banks. (b) What are the factors that

Finance Project, You have just graduated from Stanford''s MBA program and h...

You have just graduated from Stanford''s MBA program and have secured a position as a fund manager for a well known investment banking house. You have been given $300 million to m

Determine pay back period and net present value, Determine pay back period ...

Determine pay back period and net present value? A company is considering two projects with the subsequent cash flow streams:   Year           Project A

Equity, cost of equity capital

cost of equity capital

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