Methods based on advance demand information, Corporate Finance

Assignment Help:

Table gives the average MAPE for all SKUs with positive preview demand together (overall) and also per preview demand class. Furthermore, the error percentages in bold were signi?cantly lower (based on Tukey tests at a 5% signi?cance level) than those for other methods (if any) that are not in bold, but not signi?cantly different from each other.

It appears that all methods perform considerably better in Season 2 than in Season 3. An important contributing factor to the poor performance in Season 3 is that demand dropped sharply compared to previous years, although preview demand was comparable to previous years. This may have been caused by a number of factors, including macro-economic and weather conditions. We discussed this with company experts, but neither they nor we could identify important explanatory market or economic conditions as part of the cause.We remark that all data was collected before the start of the current global recession.

As expected, Method based on equal division performs worst on average. Method 1 (preview) provides the best overall performance. However, as is especially evident for Season 3, Method 1 can lead to large forecast errors for SKUs with high preview demand. Method 1 often results in much too large forecasts for those SKUs. This leads to large stocks remaining at the end of the season that either become obsolete or have to be sold below the cost price. Methods 3 avoids those large forecast errors for SKUs with high preview demand. Apparently, although high preview demand is indeed a reliable indicator of whether an SKU will be top, the exact ranking of the top SKUs based on preview demand is no guarantee that the ?nal ranking based on realized demand will be the same. This is illustrated for a speci?c product group with 9 SKUs in Table.

For this group, the three SKUs with the highest (lowest) preview demand indeed turn out to be the top (?op) SKUs. However, the realized demand for the SKU with the highest preview demand of 8, is only about half of that for the SKU with preview demand 7. For the above example with 9 SKUs, the three top SKUs and the three ?op SKUs are all correctly identi?ed. In general, especially for larger numbers of SKUs, the classi?cation is not perfect. However, most SKUs do typically end up in the correct class. To illustrate this, we consider a second example of a product group with 37 SKUs in Season 3. Table 4 shows the preview demand and the Forecast errors (MAPE) averaged over the SKUs of all three assortment groups for Seasons 2 (top) and 3 (bottom). All forecast methods are applied at the product group level. Errors in bold are signi?cantly lower (based on Tukey tests at a 5% signi?cance level) than those (if any) not in bold, but not signi?cantly different from each other.


Related Discussions:- Methods based on advance demand information

Financial management, determine the pay \back period for the project.

determine the pay \back period for the project.

Are there safety and soundness implications of mergers?, Q: Are there safet...

Q: Are there safety and soundness implications of mergers? A: No. All mergers require regulatory approval and are subject to intense examination by regulators. If anything, the

Standard deviations and correlations, Suppose you are given the expected ye...

Suppose you are given the expected yearly returns and standard deviations and correlations shown in the tables below: The market portfolio has an expected return of 18% and

Valuation, Hello, What are the similarities and differences between project...

Hello, What are the similarities and differences between project valuation and firm valuation. For example, using DCF model, by forecasting free cash flow, weighted average cost of

Explain internal rating system, Question 1: ‘An internal rating system ...

Question 1: ‘An internal rating system may incorporate supplementary customer information which is usually out of the reach of an external credit assessment institution.' Discu

Construct a table that shows the profit and payoff, Question: i) The ...

Question: i) The treasurer of a corporation is trying to choose between options and forwards contracts to hedge the corporation's foreign exchange risk. Discuss the relative

Need help with determining IRR, Continue with the Strategy of choice - Cal...

Continue with the Strategy of choice - Calculate the Net Present Value (NPV) - Determine the Internal Rate of Return (IRR) - Set Electrolux’s Required Rate of Return (RRR) E

INVESTMENT DECISION, YOU ARE A CEO OF A SOFTWARE COMPANY WHICH HAS LIMITED ...

YOU ARE A CEO OF A SOFTWARE COMPANY WHICH HAS LIMITED ACCESS TO DEBT EQUITY MARKETS. YOUR FIRMS AVERAGE RETURN ON LAST YEAR PROJECTS IS 28% AND COST OF CAPITAL IS 12 %.Would Npv or

Divident, Critically appraise how companies set their dividend policies, an...

Critically appraise how companies set their dividend policies, and explain the factors that a company will consider in setting its dividend policy and in determining the level of d

Valuation of firms, I have done most of my work on myfinancelab.com need so...

I have done most of my work on myfinancelab.com need someone to complete the rest. Deadline is this sunday. Can i get help on that?

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