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

Determine monthly saving, Determine monthly saving: Based on the follo...

Determine monthly saving: Based on the following information, answer the questions. You consider a retirement plan. The retirement plan will give you $1,000 every month for 1

Calculate the repo rate, Question: (a) Distinguish, using financial ass...

Question: (a) Distinguish, using financial assets as examples, between securities quoted at par and securities quoted on a discount. (b) Calculate the value of a £50,000 Tre

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

Online assignment, what will be the impact on operating leverage if it is p...

what will be the impact on operating leverage if it is proceeds for additional borrowings

Determine the lease rate, Robert Shapprio Leasing CO (40% tax rate) I deter...

Robert Shapprio Leasing CO (40% tax rate) I determining leae rate for a number of equipment . it is allowed to use the following accelerated depreciation rate 3 years: 25%   38%

Methods based on advance demand information, We consider three methods base...

We consider three methods based on advance demand information. Each of these methods ?rst forecasts total season demand in the upcoming season, denoted by M, for a group of SKUs N

Top - down methods, For a large set of SKUs and in two successive selling s...

For a large set of SKUs and in two successive selling seasons, we have compared the accuracy of three quantitative forecasting methods based on advance (preview) demand information

Epact 179d accelerated depreciation, Explain in detail, using the time valu...

Explain in detail, using the time value of money,if its better to receive a 685k tax deduction in 1 year vs 17,564.10 each year for 39 years.(inflation, opportunity cost, etc...) T

Weighted average cost of capital, A tax rate of 20% has been introduced in ...

A tax rate of 20% has been introduced in the Frog Islands Republic. The value of Sun corporation is now 100.000€. Bright Star Co. debt has no changed. The required rate of return t

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