OPSCM Project - Shahzar Ahmed
OPSCM Project - Shahzar Ahmed
Task 1
● Method of forecasting: Moving Average
● Justification for the choice of method:
By using the Moving Average method, demand values are averaged over a predetermined time period,
with equal weight assigned to each data point. This method works well for highlighting underlying
demand trends and mitigating random fluctuations. It is also simple to use and computationally
effective, which makes it a useful option for short-term forecasting.
One key assumption underlying the Moving Average method is that demand patterns observed in
recent periods will continue into the near future. For short-term forecasts, this assumption is generally
true because demand patterns typically show some degree of consistency over short time horizons. It is
crucial to understand, though, that this presumption might not apply to longer-term projections because
demand patterns can be impacted by a variety of variables that aren't always evident in recently
available historical data.
In conclusion, because the Moving Average approach can identify recent trends and patterns in
demand data, it is a good option for estimating demand for the ensuing six months. It's crucial to accept
the presumption that current demand trends will continue for some time to come.
Task 2
Calculate the forecast for January (Month 13) as the average of previous year’s January demand:
Forecast for January = (1 – α) * Demand for January + α * Forecast for December Forecast for
January = (1- 0.3) *1500 +0.3 *2300
Forecast for January = 0.7 * 1500 + 0.3 *2300 Forecast
for January = 1050 + 690
Forecast for January = 1740
This process was continued for the remaining months (March to June) using the previous forecasted
value and actual demand for each month. Repeat this process for each product category
(Smartphones, Laptops, and Smartwatches).
● The demand forecast for the next six months is shown in the table below
Task 3
● The forecast errors for the six months is shown in the table below
Mar 75 1 96
Task 4
● The formula for calculating MAPE:
Mean Absolute Percentage Error is the measure of accuracy of a forecasting method. It measures the
average absolute percentage difference between the forecasted values and the actual values.
Where,
MAPE = (1/n) *∑ (| (Actual Demand – Forecast Demand)/ Actual Demand|) *100
n is the number of months (is this case ,6.)
Actual Demand is the actual demand for a given month.
Forecast Demand is the forecasted demand for the same month.
Where,
n is the number of months (is this case ,6.)
Actual Demand is the actual demand for a given month.
Forecast Demand is the forecasted demand for the same month.
Feb -7 -7 -53
Mar -75 1 -96
These Bias values represent the tendency of the forecasts to be consistently higher or lower than actual
demand for each product category over the six-month period. Positive values Indicate an overestimation of
demand, while negative values indicate an underestimation of demand. These metrics provide insights into the
direction and magnitude of forecast errors for each month and product category.
Task 5
● Recommendations:
Analyzing the forecast errors and key performance metrics (MAPE and Bias) provides insights into the the
supply chain’s performance in forecasting and meeting actual demand. Based on this analysis, here are
recommendations for improving the supply chain planning process for each product category:
SMARTPHONES
MAPE Analysis
o The MAPE for each smartphone over the past 6 months indicates that the forecasting
accuracy has room for improvement, with significant errors in March and June.
Bias Analysis
o The Bias Value Is generally negative, indicating a tendency to underestimate demand for
smartphones.
Bias Analysis
o The Bias Value is close to Zero, suggesting that forecasts are relatively unbiased, but there
is room for improvement.
SMARTWATCHES
MAPE Analysis
o The MAPE for smartwatches indicates significant forecast errors, especially in the later
months (May and June)
Bias Analysis
o The Bias Value is negative, indicating a tendency to underestimate demand for
smartwatches.
In conclusion, TechHub Electronics can enhance demand sensing, work with retailers and suppliers, apply
sophisticated forecasting techniques, keep inventory buffers, and prioritise continuous improvement to improve
its supply chain planning process.
In order to effectively address particular challenges and capitalise on opportunities for improved supply chain
performance in a market that is changing quickly, differentiated strategies are required for each product
category.