1. It has been said that forecasting using exponential smoothing is like driving a car by looking in the rear-view mirror. What are the conditions that would have to exist for driving a car that are analo- gous to the assumptions made when using exponential smoothing?
2. What capability would an organization have to have to not need forecasts?
3. When a new business is started, or a patent idea needs funding, venture capitalists or investment bankers will want to see a business plan that includes forecast information related to a profit and loss statement. What type of forecasting information do you suppose would be required?
4. Discuss how you would manage a poor forecast.
5. Omar has heard from some of his customers that they will probably cut back on order sizes in the next quarter. The company he works for has been reducing its sales force due to falling demand and he worries that he could be next if his sales begin to fall off. Believing that he may be able to con- vince his customers not to cut back on orders, he turns in an optimistic forecast of his next quarter sales to his manager. What are the pros and cons of doing that?
6. Givethreeexamplesofunethicalconductinvolvingforecastingandtheethicalprincipleeachviolates.

1. A commercial bakery has recorded sales (in dozens) for three products, as shown below:

TAKING STOCK

CRITICAL THINKING EXERCISES

Blueberry Cinnamon Day Muffins Buns

Cupcakes

PROBLEMS

1 30 18 45 2 34 17 26 3 32 19 27 4 34 19 23 5 35 22 22 6 30 23 48 7 34 23 29 8 36 25 20 9 29 24 14

10 31 26 18 11 35 27 47 12 31 28 26 13 37 29 27 14 34 31 24 15 33 33 22

122Chapter ThreeForecasting

1. Predict orders for the following day for each of the products using an appropriate naive method.Hint:Plot each data set.
2. What should the use ofsalesdata instead ofdemandimply?

2.National Scan, Inc., sells radio frequency inventory tags. Monthly sales for a seven-month period

were as follows:

Sales Month (000 units)

Feb. 19 Mar. 18 Apr. 15 May 20 Jun. 18 Jul. 22 Aug. 20

1. Plot the monthly data on a sheet of graph paper.
2. Forecast September sales volume using each of the following:
   1. (1) A linear trend equation.
   2. (2) A five-month moving average.
   3. (3) Exponential smoothing with a smoothing constant equal to .20, assuming a March forecast of

      19(000).

   4. (4) The naive approach.
   5. (5) A weighted average using .60 for August, .30 for July, and .10 for June.
3. Which method seems least appropriate? Why? (Hint:Refer to your plot from parta.)
4. What does use of the termsalesrather thandemandpresume?

3.A
usage was forecasted to be 88 percent of capacity; actual usage was 89.6 percent of capacity. A smoothing constant of .1 is used.
a. PrepareaforecastforSeptember.
b. Assuming actual September usage of 92 percent, prepare a forecast for October usage.

1. An electrical contractor’s records during the last five weeks indicate the number of job requests:Week: 12345

   Requests: 20 22 18 21 22

   Predict the number of requests for week 6 using each of these methods:

   1. Naive.
   2. A four-period moving average.
   3. Exponential smoothing with?? ??.30. Use 20 for week 2 forecast.

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