Question
All Wired Up Fred Plug has just been hired as an operations analyst for All Wired Up (AWU).AWU manufactures a broad line of portable music
All Wired Up
Fred Plug has just been hired as an operations analyst for All Wired Up (AWU).AWU manufactures a broad line of portable music speakers for the consumer market. Fred's boss, Hilary Smooker, chief operations officer has asked Fred to stop by her office this morning. Hilary has a special assignment for Fred: "We have only been selling our wireless speakers for 2 years and have always made an educated guess as to how many speakers we need to plan to make each month. We usually look at how many we sold last month and we plan to make the same. As you know we have been running out of stock by the end of the month and we are missing shipments or have to ship late. Some of our biggest customers are about to drop our products. This situation has to change".
Hilary then hands Fred a report from the marketing department outlining the cost of lost sales. Hilary then proceeds: "Fred, as you can see our current production planning strategies have costed AWU too many lost sales. In April we are going to launch our new mini speakers with the best sound in the market! I am providing you with the past 2 years of monthly sales with some economic data we have tabulated (Table 1) As well, I had Mary Flowers from marketing provide us with pricing for the new year and the forecast of interest rates and unemployment rates (Table 2). What I need from you is a recommendation of how we can improve our situation. We cannot afford to keep missing shipments; we have enough capacity to make double the volume we sell now. I need specifics. Please have the report prepared in 1 week, as I need this approved by the management team before we can start to implement any changes. Let me know if there is any more information you need."
Back at his desk, with the information provided by Hilary, Fred begins the task of preparing the report.
Questions
- What are the issues and symptoms in this case?
- Using excel run regression on all 4 variables. Which variables would you feel comfortable using for forecasting? Why?
- What other qualitative factors would have an impact on the forecast for wireless speakers?
- What is your recommended method of forecasting for AWU.
- Do you have any other recommendations for AWU?
Note: Due week 5 is a bonus assignment to come up with the best forecasting method. See details on eConestoga.
TABLE 1 - Historical Sales and Economic Data
Month | Wireless Speaker Sales Units | Average Selling Price - $CDN | Interest Rates | Unemployment Rate |
Jan-13 | 24,400 | $180 | 1.25% | 6.60% |
Feb-13 | 25,000 | $180 | 1.25% | 6.60% |
Mar-13 | 25,500 | $180 | 1.25% | 6.60% |
Apr-13 | 26,700 | $180 | 1.25% | 6.60% |
May-13 | 27,850 | $180 | 1.25% | 6.60% |
Jun-13 | 27,900 | $147 | 1.25% | 6.60% |
Jul-13 | 27,800 | $147 | 1.25% | 7.00% |
Aug-13 | 27,700 | $147 | 1.25% | 7.00% |
Sep-13 | 28,500 | $147 | 1.25% | 7.00% |
Oct-13 | 30,000 | $147 | 1.25% | 7.00% |
Nov-13 | 30,500 | $147 | 1.00% | 7.00% |
Dec-13 | 30,250 | $147 | 1.00% | 7.00% |
Jan-14 | 32,000 | $147 | 1.00% | 7.00% |
Feb-14 | 32,500 | $147 | 1.00% | 7.00% |
Mar-14 | 35,650 | $147 | 1.00% | 7.00% |
Apr-14 | 34,450 | $147 | 1.00% | 7.00% |
May-14 | 36,890 | $135 | 0.75% | 7.00% |
Jun-14 | 38,900 | $135 | 0.75% | 7.00% |
Jul-14 | 39,250 | $135 | 0.75% | 7.30% |
Aug-14 | 42,150 | $135 | 0.75% | 7.30% |
Sep-14 | 42,000 | $135 | 0.75% | 7.30% |
Oct-14 | 43450 | $135 | 0.75% | 7.30% |
Nov-14 | 44250 | $135 | 0.75% | 7.30% |
Dec-14 | 45450 | $135 | 0.75% | 7.30% |
TABLE 2 - Forecasted 2015 Information
Forecasted Price | Forecasted Interest Rates | Forecasted Unemployment Rate | |
Jan-15 | $126 | 0.75% | 7.00% |
Feb-15 | $126 | 0.75% | 7.00% |
Mar-15 | $126 | 1.00% | 7.00% |
Apr-15 | $126 | 1.00% | 7.00% |
May-15 | $126 | 1.00% | 7.00% |
Jun-15 | $126 | 1.00% | 6.75% |
Jul-15 | $126 | 1.00% | 6.75% |
Aug-15 | $126 | 1.00% | 6.75% |
Sep-15 | $121 | 1.00% | 6.75% |
Oct-15 | $121 | 1.25% | 6.75% |
Nov-15 | $121 | 1.25% | 6.75% |
Dec-15 | $121 | 1.25% | 6.75% |
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