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

Discuss the importance of a trade unions recognition, "The Code of Practice...

"The Code of Practice set out in the fourth schedule to the Employment Relations Act shall- (a) provide practical guidance for the promotion of good employment relations". (Se

How competitive is the market for banking services?, How competitive is the...

How competitive is the market for banking services? A: With more than 7,000 banks and thrifts in the U.S., banking is one of the most competitive industries in the world. Consi

IRR & WACC, I have been given 3 different types of projects. They state th...

I have been given 3 different types of projects. They state the IRR and how much the project will add. The question goes on to give a WACC with break points. The question wants

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

What are potential limitations, Problem: "It is simply not really the c...

Problem: "It is simply not really the company's choice who is and is not a stakeholder" (a) Evaluate the above statement in the context of Civil Society Organisations as st

Differentiate fully speculation and arbitraging, Question: (a) With th...

Question: (a) With the help of illustrative and numerical examples differentiate fully speculation and arbitraging in the context of foreign exchange. (b) Shirley, a trade

Find weighted average cost of capital - dividends, Duke Power Corporation h...

Duke Power Corporation has $500 million (face value) of zero-coupon bonds, which will provide 6% return to the bondholders and will mature after 10 years. The stockholders of the c

Mr, PROBLEM 1 A friend of yours, employed as a Tier 2 field service repres...

PROBLEM 1 A friend of yours, employed as a Tier 2 field service representative for a telephony corporation, wants your help as a financial specialist to determine the financial co

Estimate the dollar-equivalent or adjusted rate of return, In January 2009 ...

In January 2009 you bought a German stock portfolio for 6,000,000 Euros and sold it in December 2009 for 7,000,000 Euros.  Assume that over the same period the dollar's exchange ra

Capital budgeting and financial modelling, Need assignment help. Finance, n...

Need assignment help. Finance, needs to be done in excel and word.

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