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1) The operations manager of A-CAT Corp is tasked with forecasting transformer requirements to support production of their voltage stabilizers product, whose sales have recently declined. 2) The current forecasting method is described as problematic, relying on limited historical data and not adapting well to changes. 3) The operations manager is asked to analyze historical sales data and recommend improvements to their transformer purchasing process. Exponential smoothing is proposed as an alternative forecasting method.

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21 views14 pages

Summary

1) The operations manager of A-CAT Corp is tasked with forecasting transformer requirements to support production of their voltage stabilizers product, whose sales have recently declined. 2) The current forecasting method is described as problematic, relying on limited historical data and not adapting well to changes. 3) The operations manager is asked to analyze historical sales data and recommend improvements to their transformer purchasing process. Exponential smoothing is proposed as an alternative forecasting method.

Uploaded by

kumar.ankit583
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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-OPERATIONS MANAGEMENT-

A-CAT CORP.:
FORECASTING
SUMMARY OF THE CASE

1. Introduction
•Shirish Ratnaparkhi, the operations manager at A-CAT Corporation (A-CAT), is tasked with preparing a sales
forecasting report for the company's primary product, voltage stabilizers.
•The importance of accurate forecasting is emphasized.
2. The Company (Background)
•A-CAT is a leading producer of electrical appliances in India, focusing on the rural market.
•It operates two manufacturing units in Gondia, Maharashtra.
•The company has alliances and collaborative ventures with other firms.
•Key products include voltage regulators (VR-500) used for household appliances.
3. The Issue
•Sales of voltage regulators have recently declined.
•Questions arise about the company's policy of stocking transformers, a vital component for voltage regulators.
•The challenge of managing transformer inventory is discussed, including supplier constraints and financial
implications.
•A-CAT's revenue and profit growth are contrasted with the volatility in voltage regulator sales.
4. The Problem Statement
•Vice-president Arun Mittra calls for a comprehensive data report on sales figures for analysis.
•The current method of estimating transformer requirements is described as problematic, leading to both under-
stocking and over-stocking.
•Mittra tasks Ratnaparkhi with analyzing the data and making recommendations for improving transformer
purchasing.
•Ratnaparkhi is asked to analyze the data and propose projections.
TRANSFORMER REQUIREMENTS DURING THE PERIOD (TAKEN FROM THE SALES
OF VOLTAGE REGULATORS)

2006 2007 2008 2009 2010


January 779 845 857 917 887
February 802 739 881 956 892
March 818 871 937 1001 997
April 888 927 1159 1142 1118
May 898 1133 1072 1276 1197
June 902 1124 1246 1356 1256
July 916 1056 1198 1288 1202
August 708 889 922 1082 1170
September 695 857 798 877 982
October 708 772 879 1009 1297
November 716 751 945 1100 1163
December 784 820 990 998 1053
CONVENTIONAL METHOD OF
FORECASTING USED

The existing method of forecasting, involves looking at the sales figures of the last two
to three months and the sales figures of the last two years in the same month and
making a guess about the number of transformers needed
PROBLEMS WITH THE
EXISTING METHOD

The existing method considers only a limited set of historical data points.. This approach
may not capture important patterns and trends in the data

The existing method doesn't adapt well to changing market conditions or seasonality. It relies
heavily on recent data

The existing method appears to be based on ad-hoc observations and guesses. It lacks a
systematic and data-driven approach to forecasting
EXPONENTIAL SMOOTHING
METHOD
Exponential smoothing is a time series forecasting method that is used to analyze and
predict data points by assigning different weights to different observations in the past.
The method is particularly useful for forecasting when there is a consistent trend and
seasonality in the data.

New Forecast = Last


Forecast + alpha (Last
Demand- Last
Forecast)
• Alpha varies between 0-1 (Usually, 0.2-0.4)
• Selecting the optimal alpha value often involves finding a balance between
responding quickly to changes and avoiding excessive sensitivity to noise.
• The best alpha value depends on the characteristics of the time series being
analyzed.
• Smaller alpha results in smoother forecasts, a larger alpha makes the
forecast more sensitive to recent changes
BENEFITS OF METHOD
EMPLOYED

Exponential smoothing techniques, are useful for forecasting when there is a


seasonality component in the data. It involves smoothing historical data and
extrapolating future values.

Effective for data with a clear seasonal pattern

Provides weighted forecasts that respond to recent trends.


EXIBIT 2 ; SALES FIGURE PF REFRIGERATORS DURING THE PERIOD

QUARTER 2006 2007 2008 2009 2010

I 3832 4007 4826 5411 6290

II 5032 5903 6492 7678 8332

III 3947 4274 4765 5774 6107

IV 3291 3692 4972 6007 6729


Forecasting done through Exponential Smoothing method

2006 2007 2008 2009 2010 2011


January 779 845 857 917 887 887.0
February 802 739 881 956 892 887.0
March 818 871 937 1001 997 888.5
April 888 927 1159 1142 1118 921.1
May 898 1133 1072 1276 1197 980.1
June 902 1124 1246 1356 1256 1045.2
July 916 1056 1198 1288 1202 1108.4
August 708 889 922 1082 1170 1136.5
September 695 857 798 877 982 1146.6
October 708 772 879 1009 1297 1097.2
November 716 751 945 1100 1163 1157.1
December 784 820 990 998 1053 1158.9
Actual
Ex smoothing
data Error Abs Error % Error
2007
2007
January 779 845 66.0 66.0 7.81%
February 779.0 739 -40.0 40.0 5.41%
The Mean absolute percentage error for
March 785.9 871 85.1 85.1 9.77% the actual and forecasted data for the year
April 795.5 927 131.5 131.5 14.18% 2007 is 10.38%
May 823.3 1133 309.7 309.7 27.34%
June 845.7 1124 278.3 278.3 24.76%
July 862.6 1056 193.4 193.4 18.32%
August 878.6 889 10.4 10.4 1.17%

September 827.4 857 29.6 29.6 3.45%

October 787.7 772 -15.7 15.7 2.03%

November 763.8 751 -12.8 12.8 1.70%

December 749.5 820 70.5 70.5 8.60% This is less than the percentage difference of the transformers ordered in
two consecutive year ( 13.39%)
MAPE 10.38%
THANKYOU !!

SUBMITTED BY: -

Manuj Kotnala (230101118)


Sejal Nayyar (230101182)
Ankit Kumar (230101286)
Seepee Agarwal (230103209)
Anurag Syam (230101249)
Jitesh Kumar Lunia (230103280)
R C Balaji (230101320)

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