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

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 >>?

Evaluate the projects, Consider the subsequent information about four diffe...

Consider the subsequent information about four different projects. Each requires an initial outlay of Rs2,000,000 but the firm only has funds to undertake one project. The firm ha

Report of a questionable, Please l have an assignment and l want to send th...

Please l have an assignment and l want to send the document to you so that you will send it to the Tutors on Chegg to help me with it. Can l send it please?

Explain foreign exchange market, Question: a) Using illustrative and ...

Question: a) Using illustrative and numerical examples, differentiate between arbitraging and speculation in the context of foreign exchange market. b) One year borrowing

Debt finance, Differences btn debt finance and preferance share capital

Differences btn debt finance and preferance share capital

Cost of Capital, Calculating Cost of Equity. Bohannon Corporation''s common...

Calculating Cost of Equity. Bohannon Corporation''s common stock has a beta of 1.10. If the risk-free rate is 4.5% and the expected return on the market is 12%, what is the company

Assignment, Hi, I would like someone to accomplish my corporate finance pap...

Hi, I would like someone to accomplish my corporate finance paper Objectives o To understand the financial profile of the selected company. o To project future cash flows of the co

Distinguish between natural hedging and cross-hedging, Question: (a) Is...

Question: (a) Is it feasible for a firm to hedge without using derivatives? (b) Distinguish between natural hedging, cross-hedging and direct hedging. (c) Mr Hedginglall

Multinational business finance, 1- Suppose that on January 1st the annual c...

1- Suppose that on January 1st the annual cost of borrowing in Swiss Francs is 5%. The spot rate of USD on January 1st is CHF/USD0.98. Six month forward rate was quoted as CHF/USD

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